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Donald Trump does not hide that he does not like state intervention in most things. But the free market forces seem all unsupported in the existential issue that his administration faces. As the world warms up and time becomes more extreme, the traditional commercial insurance system looks like a less and less sustainable way to protect against fire, flooding and other natural disasters.
Forest fires that caused an apocalyptic desolation this month in some of the most remarkable parts of Los Angeles have destroyed about 17,000 buildings, and losses are estimated at between $ 20 and $ 30 billion. Floods, forest fires, strong thunderstorms and other so -called hazards outside the top traffic cost the world of $ 136 billion last year, According to Munich ReThe greatest reinsurer in the world, has grown sharply to the 10-year average, adapted to an inflation of $ 110 billion. About half of the total amount is provided.
But as losses grow and growing up, commercial insurance economy starts shooting. In many foci of climate catastrophe, this has happened directly, since the increasing price of insurance has made it inaccessible. In some, such as California, the second order effect takes place more slowly because regulatory efforts limit premium growth have encouraged insurers and reinsurers withdraw from the market. According to one assessment of CitigroupReinsurers – companies from which insurers usually buy insurance – absorb less than 3 percent of the fire losses secured in LA, a part of a typical share.
The State California Fair Plan truly provides a naked household protection option for homeowners. But the lineup leaves large emptiness in the cover. The federal emergency management association also plays a role in such disasters and runs a national flood insurance program, which helped owners of the Florida Homes after Hurricane Milton last fall. But just like the insurers from the private sector, the FEMA flood insurance department, the national flood insurance program, had to increase prices to remain solvent. Even with the great support of taxpayers, estimated The US Government’s responsibility office at $ 27 billion despite the double flood insurance rate, Gao counts that only 4 percent of US households have flood insurance.
If commercial operators cannot make the numbers function and the schemes financed by taxpayers are under pressure in the middle of tense state budgets, what are the possibilities sustainable?
Spanish Consorcio de Compensación de Seguros believes he may have an answer. State -owned insurer does not act as an emergency protection of the failed commercial market, but in partnership with insurers from the private sector. Annual harvesting € 7 at every € 100,000 assets secured in a commercial shelf, € 700-800 million annually are collected to secure extreme risks, including natural disasters and terrorism. Recording floods are expected to launch more than 3.5 billion euros of CCS payment last fall last fall. Even then, thanks to years of profitable business, it will retain reserves more than 7 billion euros.
Similar versions of a public-private insurance partnership operate elsewhere. Natural danger insurance scheme in New Zealand, for example, covers the first $ 300,000 in floods, fires and storms provided by a commercial insurer. Flood Re from the United Kingdom Reinsurers who take over flood insurance in high -risk areas, funding coverage of a combination of reinsure and industrial fees. (Similar structures exist in the US, for example, a non-profit group of Florida citizens relies on a combination of premiums and fees, although it is undermined by focusing on a high-risk state, instead of taking over diversified risks across the country.)
Such programs directly deal with fundamental and growing deficiencies in taking over commercial insurance: as comparing data and analysis becomes more sophisticated, thus the ability to accurately determine the risk to such an extent that the original concept of insurance that includes risk risk association at a turning point. If you know where the cyclone is likely to hit, there is a commercial incentive that people in these areas do not ensure at all.
When it comes to climate risk, there are obviously measures to reduce the risks that should be taken. House builders should not build new homes on flood plains. Fire passages should be built in places of famous forest fires. But as climate risks are growing and acting analysis is becoming more sophisticated, it may be that public-private partnerships that combine commercial wit with the risk of blind programs managed by the Government (although not funded by the Government) the only sustainable model for a decent society. Since you are a skeptic of both climate change and to the Great Government, do not expect the new US president to adopt them early.
patrick.jenkins@ft.com
