This talking point is complete nonsense. If the risk of natural disasters in an area people want to live in increases, that’s good for insurance companies. It drives up the demand for their product. It’s true that home insurance providers have been fleeing the areas affected by these fires—with one provider canceling thousands of policies in the Pacific Palisades in the last year alone. But that’s not because of climate change, it’s because of government intervention.
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When governments mess with insurance prices—either through subsidies, cheap public insurance, or price controls—the result is always the same. More people move to dangerous areas that are highly susceptible to natural disasters.
In 1988, California passed a law that forced insurance prices down by 20 percent, banned providers from using forecasts of future risk to set prices, and subjected all future price increases to government oversight. With rates severely decoupled from risk, the state saw extensive development in some very fire-prone areas. Then, after an exceptionally bad fire year in 2017, insurance providers tried to get approval to raise premiums to account for the high level of risk across the state. The government said no.
As a result, seven of the twelve largest home insurance providers pulled out of California. And that trend is continuing today.
~ Connor O'Keeffe, "Climate Change Is Not the Cause of California’s 'Insurance Crisis'," Mises Wire, January 14, 2025
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