We sit on the balcony of a high-rise, beachfront condo for about a week once a year. It’s vacation. We get in the water, eat seafood, enjoy the sun. When I have moments alone on that balcony, I can’t help but look out at the ocean and think about life and time and all sorts of big-picture things.
Now, sitting here at home on a Sunday afternoon, I’m thinking of ocean-front life and what it will be in years to come. Climate change seems like yet another red/blue kind of rhetorical battleground — two plus two will eventually be one, too, I’m afraid, since we can’t agree on anything these days — but I believe the property insurance market, which must observe the climate in dollars and cents, not ideology, will really tell the tale, setting the stage for what happens in vulnerable lands.
Of course, insurance is one of modern life’s pains. It feels like so much of life is tied to the costs and limitations of insurance, with wild swings happening all the time. For instance, our health insurance company recently decided to quit covering my wife’s inhaler for asthma, forcing her onto another inhaler that triggered an adverse reaction. She was quoted a price of $841 per inhaler, per month to remain on the same brand. She needs a particular kind, and after much wrangling and involvement of doctors, she was able to get it for $280 a month, which is still terribly steep, but necessary. Anyway, this is modern life. If you are an adult in America, you probably have your own insurance stories, right?
No doubt, health insurance is its own crazy landscape. But increasingly, so is property insurance in areas with rising claims.
Think of investment from the insurers’ point of view. Say you oversee coverage areas. Do you want to invest in Napa Valley right now, where vineyard properties go for as much as $1 million an acre, but where wildfires are devastating the wine business. Even vineyards not touched by fire are having grapes ruined by smoke. Or, do you feel confident in insuring any of the buildings in the vicinity of the condo collapse in Miami? No, you can’t directly tie that tragedy to climate change, but just think of the uncertainties now in that market. As an insurer, would want to make a new investment in aging and sometimes improperly maintained properties in hurricane-prone flood zones in a warming world? Or would you prefer to park your money somewhere further inland where the weather risks seem less extreme?
This isn’t just an American issue. Think of the terrible flooding devastation we just witnessed in Germany and Belgium from an insurers’ perspective. Obviously, the loss of life in any disaster is the primary issue, but the secondary issue is the money. These communities will want to rebuild. How much will it cost to insure such properties when catastrophic flooding seems increasingly likely?
Insurance companies also seek their own insurance coverage to help manage catastrophes. It’s called re-insurance. What rates will insurance companies get in the coming decades for their own insurance against calamity? Will it be profitable in years to come to insure areas increasingly prone to flooding and fire?
Many Florida residents already find it terribly difficult to get affordable coverage — or any coverage in some areas. The Citizens Property Insurance Corporation was established in 2002 in Florida as a state-run insurance organization to assist homeowners who couldn’t get insurance coverage elsewhere. This was supposed to be a plan of last resort, but it’s becoming more of a go-to for insurance in the state. This means that Florida taxpayers are increasingly on the hook for catastrophic coverage.
Now, think about the ripple effect if insurers truly flee flooding and wildfire prone properties in years to come. First, what becomes of that land? I stink at prognosticating. But let me put things this way — I won’t be surprised if….
I won’t be surprised if high-dollar investment in coastal properties dramatically decreases in the next couple of decades due to insurability issues. If insurers get too skittish, then so will other investors. If this happens, there will be a lot of properties that decline in value and in proper maintenance, which would be accompanied by some other negatives, such as more crime, declining business and a reduced appeal of living in those areas.
I won’t be surprised if our area is increasingly a destination of people moving north from Florida and east from the west. The insurability of properties in areas less affected by climate change will make them more attractive.
Scientists report that CO2 levels are higher than they’ve been since the Pliocene Epoch (5.33 million to 2.8 million years ago) at over 400 ppm (parts per million) and rapidly going up. And that troubles me, particularly as weather seems increasingly bizarre, though I know many people aren’t troubled and don’t see any of that as true.
But the property insurance market stands outside of ideological rhetoric as a fiscal barometer for climate change — a follow-the-money truth revealer.
I don’t know how many more beach trips I have left in this life, but I like sitting high above the sand, looking out to the horizon over the ocean. Millions of others enjoy this, too. And there is an ocean of money beneath this common desire.
Then there is the actual ocean. Our relationship with that blue-green beauty is complicated, usually a joy, sometimes a horror. We can easily believe that our vast monetary ocean is in control of coastal land, which is stacked with investment upon investment. But sometimes, fiscal green is nothing but sand castles, easily wiped out by the real ocean.
I believe insurance — that all too powerful financial force in our lives — will position itself according to the real climate outlook, good or bad.
It will have a major say in how long we play in the sand.
Zach Mitcham is editor of The Madison County Journal. He can be reached at email@example.com.