I ask the question, “is the world becoming uninsurable?” not as an expert on the insurance industry but as a homeowner who can no longer obtain hurricane insurance, and as an observer of long-term trends keenly interested in the way global risks pile up either unseen, denied or misinterpreted until it’s too late to mitigate them.
The probability that we’re entering an era of globally higher risks is increasing, and this is awareness is visible in headlines such as these:
Home Losses From the LA Fires Hasten ‘An Uninsurable Future‘ (Time)
The Age of Climate Disaster Is Here: Preparing for a Future of Extreme Weather (Foreign Affairs)
‘We’re in a New Era’: How Climate Change Is Supercharging Disasters (New York Times)
This is not an abstraction, though many are treating it as a policy debate. As noted previously here, the insurance industry is not a charity, and insurers bear the costs that are increasing regardless of opinions and policy proposals. Insurers operate in the real world, and their decisions to pull out of entire regions, reduce coverage and increase premiums are all responses to soaring losses, a reality reflected in these charts.
Losses rise with inflation, of course, but the losses are rising far above background inflation.
This raises a point few seem to ponder: the world isn’t simply a political structure, yet virtually all the proposed solutions to every problem are political or technological in nature: we can solve this or that politically, or with AI. That the private-sector can trigger crises that have no political or technological fix is on very few pundits’ radar.
Uninsurable risk is one such problem.
Like virtually all problems, it’s been approached as a problem with a political solution: the state or federal government can force insurers to continue offering policies that put them on the hook for additional catastrophic losses, and / or become “insurers of last resort.”
That neither is a solution to the actual problem is glossed over, because as a society, we’ve become accustomed to the idea that there is a political solution to all problems.
So the California authorities have prohibited insurers from cancelling coverage within the fire zones:
“California Insurance Commissioner has issued a mandatory one-year moratorium that will prohibit insurance companies from enacting non-renewals and cancellations of coverage for home owners within the perimeters or adjoining ZIP Codes of the Palisades and Eaton fires in Los Angeles County regardless of whether they suffered a loss. The moratorium will expire on Jan. 7, 2026.”
As for becoming the “insurer of last resort,” states are finding providing such coverage is a financial black hole:
The wildfires lay bare an insurance crisis in California.
“Even before this week’s wildfires, officials in the region had warned that the California FAIR plan, a state-run insurer of last resort that has increasingly become a main source of coverage for residents, was “one bad fire season away from complete insolvency.”
The FAIR plan’s exposure soared by 61 percent year-on-year to $458 billion by the end of September, according to Mr. Heleniak. Driving that is the flight of insurers from the California market: Between 2020 and 2022, private insurers dropped coverage for 2.8 million home insurance customers, Mr. Heleniak wrote.
One problem for insurers and Californians: Unlike hurricanes, wildfires are harder to model, ratcheting up the risk.”
The problems being exposed do not lend themselves to tidy political / policy fixes that magically return the world to a past era of lower risks. Risks and losses cannot be extinguished, they can only be transferred to others. This is the intrinsic limit of political fixes: we take the risks and losses and transfer them to others lacking the political power to contest the transfer.
Or we transfer the risks and losses to the entire system, increasing the potential for a systemic collapse.
Consider the realities of acting as the “insurer of last resort.” The insurance industry is built on a foundation of a handful of re-insurance companies that provide insurance to insurers should losses overwhelm the expected norms.
If re-insurers decide not to offer coverage due to high risks or risks that cannot be estimated with any reliability, then the “insurer of last resort” is self-insuring all potential losses, meaning if the house will cost $500,000 to rebuild, $500,000 in cash must be kept in reserve, because there is no guarantee a lender will risk offering a mortgage without conventional insurance.
If the state or federal government offers an open checkbook–we’ll pay any and all losses, no questions asked–then those ultimately paying these astronomical bills–the taxpayers–will reasonably ask: why are we subsidizing people to rebuild in places that are clearly no longer habitable due to the probabilities of another fire, flood or hurricane?
In other words, the entire idea of being an “insurer of last resort” is based on an unlimited supply of money to fund losses that no longer make financial sense. If rebuilding a house destroyed in a “100 year flood” once made sense, now that there’s a “100 year flood” every five years, rebuilding in that locale no longer makes sense. So why should taxpayers absorb the costs of this selective blindness to the realities of rising global risks?
This is not the first time climate change has impacted civilization in ways that are not visible to or accepted by those living through the transition.
The early 1600s were an era of global crises, conflict and collapse, largely driven by cooler weather that reduced crop yields and thus the caloric intake of people, leaving them more prone to succumbing to disease and more willing to overthrow their rulers. For their part, this made rulers more willing to risk war and make hasty, ill-advised decisions that accelerated the crises.
The book Global Crisis: War, Climate Change and Catastrophe in the Seventeenth Century by Geoffrey Parker offers a comprehensive overview of these dynamics.
Another era in which risks rose without participants realizing that global circumstances were pressuring economies and societies adversely nearly brough the Roman Empire to its knees: the Third Century Crisis, “a period in Roman history, spanning roughly from 235 to 284 AD, where the Roman Empire nearly collapsed due to a series of internal civil wars, barbarian invasions, economic instability, and a chaotic succession of emperors.”
The emergence of polycrisis fueled by climate change and globalized trade (which delivers instability and pandemics along with goods) has been ably described by Kyle Harper, in this Smithsonian magazine article
How Climate Change and Plague Helped Bring Down the Roman Empire
and in his 2019 book, The Fate of Rome: Climate, Disease, and the End of an Empire.
Ours is an era soaked in the hubris of “no limits”: there are no limits on human ingenuity, and so there are no limits on what we can do in the real world. Limits are anathema in today’s zeitgeist, and so the idea that Nature imposes limits that manifest as financial limits–go ahead and print $100 trillion to fund every “no limits” proposal, but that will destroy the value of all the “money” we’re creating to fund “no limits”–is unacceptable.
In times less allergic to limits and more willing to face financial realities, people accepted that it made no sense to build more than seasonal shacks along coastlines prone to devastation. To give up permanent residences with air conditioning and all the luxuries of modern life because these no longer make financial sense is a taboo topic.
I have long held that the world has been blessed with 60+ years of beneficial weather, and so we’ve been blessed with 60+ years of agricultural surpluses globally. It seems likely this era is ending, and we’re as yet unprepared for this contingency: food might become not just scarce but chronically scarce.
As I’ve noted previously, diesel-fueled robots can roam the field zapping weeds with lasers, but what’s the point of that technology if there’s no rain or high winds and heavy rain destroyed the harvest? That there are limits on our technological powers is also taboo. Diesel doesn’t deliver the right amount of rain, and neither does AI.
It wasn’t coincidence that the Bastille was torn down just as the price of bread spiked to unaffordability. Scarcities, shortages, rising prices and the illusions of “no limits” all reinforce each other. And since the participants either don’t grasp or refuse to accept the nature of the new era of rising risk, they seek scapegoats in what they do grasp: politics, policies, and the transfer of losses and risk to others.
As I’ve often sought to explain, transferring losses and risk to the entire system seems to extinguish the risk by diluting it in a larger pool of resources. So the losses triggered by the Global Financial Crisis of 2008 were absorbed by the entire financial system and economy, pools of resources large enough to dilute the losses to the point that the illusion that the risk had vanished could be sustained.
But risk isn’t extinguished, it’s only transferred, and how it manifests is based on complex interactions, dependency chains, over-optimization and the erosion of resilience. The risks of a global financial meltdown didn’t vanish in 2009; those risks were transferred to the system as a whole, a transfer that continues to this day, as risk piles up in a systemic fashion few see, or dare to recognize.
This same reluctance to recognize system risk is evident in global supply chains, the global food supply, and every other tightly bound, highly interconnected system we depend on.
Is the world becoming uninsurable? The answer is yes, in two ways. One is the reality that much of what we take as our God-given right no longer makes financial sense, and eventually the costs of clinging onto a status quo that no longer aligns with real-world limits will have to be covered by taking resources and capital from something else we take as our God-given inheritance.
It boils down to the classic scenario in which we want three things but are limited to choosing two. Once system risks start manifesting, we’ll be reduced to saving one and sacrificing two. If we refuse to accept that triage, we’ll end up saving nothing.
The other way the world is becoming uninsurable is much of what we take for granted–abundant, affordable resources, products, food and fuel, for example–is not guaranteed, and cannot be insured by political or technological means. This won’t stop us from pursuing the hubristic extremes of “no limits,” but that pursuit will hasten the collapse made inevitable by transferring all risks to the system. The pool of resources is not infinite, and so the risks can no longer be diluted.
Highlights of the Blog
The Easy Credit, High Interest Rate Swindle 1/9/25
I Quit! The Tsunami of Burnout Few See 1/7/25
High Interest Rates Are Healthy, Low Rates Are Poison 1/6/25
Best Thing That Happened To Me This Week
We opened and grated some of our coconuts after a long hiatus, and baked coconut shortbread cookies and a coconut pie to share with friends.
The missing cookies were sampled for “quality control purposes” (heh).
Few people make these treats nowadays because there is no way to obtain the results without a lot of labor.
What’s on the Book Shelf
The Fate of Rome: Climate, Disease, and the End of an Empire.
Global Crisis: War, Climate Change and Catastrophe in the Seventeenth Century.
From Left Field
NOTE TO NEW READERS: This list is not comprised of articles I agree with or that I judge to be correct or of the highest quality. It is representative of the content I find interesting as reflections of the current zeitgeist. The list is intended to be perused with an open, critical, occasionally amused mind.
Many links are behind paywalls. Most paywalled sites allow a few free articles per month if you register. It’s the New Normal.
The Mismeasure of Money
The “Grand Macro Strategy” Of 2025: What US Economic Statecraft Will Look Like Under Trump
The rise and rise of Maye Musk: China’s love affair with Elon Musk’s mother
The Telepathy Tapes (via Richard M.)
Husserl vs. Heidegger: Two Takes on Phenomenology
He’s anti-democracy and pro-Trump: the obscure ‘dark enlightenment’ blogger influencing the next US administration
The Depletion Paradox (via Cheryl A.)
FEDERAL FUNDS RATES AND SOLAR ACTIVITY (1955-2024): EVIDENCE OF A VERY HIGH CORRELATION (via Atreya)
America, China, and the Death of the International Monetary Non-System (Russell Napier)
I found treasures in a shipwreck.
As Flames Consume Architectural Gems, a Hit to ‘Old California’
“You should never play to win but so as not to lose. Think what moves will be quickest beaten, avoid making them, and make whatever move will take most time to beat. In learning any accomplishment, in controlling one’s own conduct, and in governing a nation, the same rule applies.” Yoshida Kenko
