Severe climate events, such as hurricanes, wildfires, and flooding, are causing significant financial strain on insurance companies in the U.S. and Canada. Preliminary estimates from the Los Angeles wildfires alone suggest potential costs of $28 to $45 billion for insurers. Additionally, 2024 witnessed record insurance payouts in Canada of $8.55 billion due to events like flooding and wildfires. Experts warn that rising premiums and uninsurable areas could lead to broader societal and financial issues, marking a critical moment for the insurance industry and its capacity to cope with climate-related risks.
What's happening now is that the really, really dark [climate events] are just catastrophic and all in one place, happening at the same time.
In terms of insurance, it creates a societal problem, not just an individual problem.
The L.A. fires are a good illustration of this. The flames that swept through the Pacific Palisades and Altadena areas burned about 15,000 hectares.
As premiums rise and some regions become uninsurable, it could have a cascading effect that could lead to a financial crisis.
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