Insurance Companies Should Withdraw From Climate-Vulnerable Regions to Mitigate Financial Risks

What's this about?

People disagree about whether insurance firms should leave places where floods, fires, storms, and sea rise create more danger.

The question asks if leaving helps firms avoid big money losses.

What supporters say

• Insurance firms cannot keep selling cover for less money than they pay after disasters.
• Too many costly claims can drain a firm’s savings and hurt its power to pay later claims.
• Higher prices or lost cover can warn people that a place has more risk than they once thought.
• Less insurance may make people think twice before new building in flood, fire, or coast areas.

What critics say

• When an insurance firm leaves, floods, fires, and storms still threaten homes and shops.
• Leaving takes away private help for people who need money after a disaster.
• The proof shows more stress for families and insurance markets than changes in where people build.
• We do not know if firms leaving will often cause people to move from risky places.

The bottom line

Firms may need to cut back in the most risky places to stay able to pay claims.

But wide pullbacks from all climate-risk areas do not seem like the best answer.