The paradise of California no longer has anyone to insure homes
This week, homeowners in California received some very bad news: the large insurance company State Farm decided not to renew home insurance for 72 thousand families. These will therefore find themselves exposed to damage resulting from possible natural disasters. The problem is that California combines a not exactly positive seismic situation, given that it is the state of the famous San Andreas Fault, with poor land care that facilitates fires or floods.
So what, until yesterday, was the model state in which many went to seek their fortune, risks seeing many families lose everything they have in a not exactly unlikely natural disaster.
Sate Farm is not the only company to have canceled insurance coverage: the state is experiencing a real insurance crisis which has seen the collapse of several companies. The problem is that, until now, it was forbidden to apply risk models linked to the risk of catastrophes when calculating the insurance cost. Obviously, if applied, these models would cause some urban areas to see extremely high increases in insurance costs. Suffice it to say that San Francisco and Los Angeles, the two main cities, are located in highly seismic areas where the risk of serious earthquakes in the next 100 years is not a risk, but a certainty
As you can see from the map above, virtually every large or medium-sized city in California is located in a high-risk area, and we don't consider the floods, which recently hit Los Angeles, or the fires. However, due to political will, until now it was forbidden to apply insurance calculation models based on catastrophic risk. Ultimately the companies decided to leave.
The situation became so bad that the state insurance regulator was eventually forced to allow the use of future catastrophe prediction models to charge homeowners higher rates.
The new action plan would leave insurers free to assess the risks of earthquakes, fires, floods and terrorist attacks. In exchange the authority would like greater efficiency, but it is foreseeable that in Los Angeles, hit by fires, at risk of earthquake, flood and also, why not, terrorism, the insurance cost will skyrocket.
Obviously when fixed costs skyrocket, real estate values fall, so Hollywood stars, but also Silicon Valley tycoons, will find themselves in the hands of quite a few devalued homes. Partly due to bad luck, partly due to the lack of capacity of the local authorities, voted by the citizens themselves.
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The article California paradise no longer finds anyone who insures its homes comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-paradiso-della-california-non-trova-piu-chi-assicura-le-case/ on Sun, 24 Mar 2024 07:00:05 +0000.