California is still burning, putting the thorny politics of the climate crisis on full display. While Los Angeles’s working and middle-class residents face months, years, and potentially decades of financial ruin, the wealthier residents of places like the Pacific Palisades might have an easier time of it. As while their service-worker neighbors mourn incinerated mobile homes and apartments, mansion-owners might already be hiring contractors from their second abodes in Aspen. The disparity between fire victims seems like a grotesque case study for how rising temperatures stand to deepen and entrench existing inequalities: the rich can get out, while the poor suffer. The truth is actually worse than that.
The rich can insulate to a certain extent by getting out of town when things get bad, or by hiring private firefighting brigades. They can afford to rebuild in areas that poorer households would be forced to abandon. The Santa Ana winds can’t be bought, though. While Malibu always burns, climate change is increasingly coming for the wealthier, whiter places once advertised as “climate havens.” And eager as billionaires are to broadcast themselves as islands of self-sufficiency, their fortunes and lifestyles alike depend on armies of the poor and climate vulnerable: Uber Eats drivers braving smoky, dangerous air to deliver morning coffee orders; warehouse workers fulfilling last-ditch Amazon bulk buys for N95 respirator masks; maids cleaning soot off of deck furniture, whose own families real estate developers have displaced into more fire-prone areas; righands, refinery engineers, and gas station attendants who make it possible for the wealthy to fill up their G-Wagons on the way to Tahoe or Monterey.
For some time now, one emerging narrative about the climate crisis has been that the rich will simply escape on gilded lifeboats to private islands—literally or metaphorically. In some respects, though, that story is too optimistic. If that were the case, then the rest of us might be freed up to figure out some more equitable and efficient way to handle the effects of rising temperatures. Unfortunately, the ways the rich respond to disasters tend to make them harder on everyone else.
Among the many reasons why California’s fires are so destructive is the fact that there’s so much property there, meaning both higher losses and more kindling. The rich have long chosen to build in areas that, as the late Mike Davis pointed out, burn regularly. Well-to-do areas have for decades pressured local and state governments to suppress fires that could clear brush and maintain local ecosystems; when those areas burned, the rich built back fancier. As temperatures warm, though, the kinds of fires that had for centuries been a normal part of certain regional ecosystems have gotten stronger, and spread further. That hasn’t stopped toney development in those places. And as the cost of housing in major cities has skyrocketed amid real estate speculation—rent for many Angelenos could rise by 6 percent this year—poorer and middle-class families are pushed out into woodier, more flammable suburbs.
Governments, meanwhile, have entrusted private companies to protect the value of most people’s sole assets: their homes and cars. Purchasing home insurance is a prerequisite to receive a federally-backed mortgage, which is how all but the wealthiest—i.e. those who can afford to pay for homes up-front—manage to buy houses. The renters that account for about a third of households nationwide live downstream of that process; landlords factor the cost of home insurance into the rents their tenants pay each month. State regulators in California and every other state are charged with overseeing their own property insurance markets and protecting consumers against excessive rates, as well as inadequate or unfairly discriminatory policies.
This regulatory structure is similar to those that govern water and electric utilities, whereby companies need to request permission from state authorities in order to raise rates. Unlike those essential services, however, insurance companies aren’t required to offer coverage. Starting in 1992, big insurers fled Florida en masse after Hurricane Andrew dealt out $25 billion worth of insured damages—about $56 billion in today’s dollars. Current estimates now suggest that losses from this month’s fires in Los Angeles County could range between $135 and $150 billion. [
Infamously, now, State Farm and AllState both announced in 2023 that they would stop writing new home insurance policies in California, citing (among other factors) wildfire risk. Last spring, State Farm also declined to renew 72,000 policies in some of the places worst-hit by this month’s fires. This is unseemly and perfectly legal. Insurance companies’ mandate isn’t to provide an essential service but to to make money off of the products they sell. If those products aren’t profitable they’ll stop offering them. Scaling back coverage—or threatening to pull out of a state entirely—also gives them leverage with state policymakers like California’s Department of Insurance, allowing them to negotiate more favorable terms. California has issued a one-year moratorium on insurance cancellations and non-renewals, although that seems unlikely to stem the crisis plaguing homeowners and renters there.
Of course, indefinitely limiting companies’ ability to raise rates on people who choose to stay in harm’s way, and thereby continuing to provide artificially cheap insurance to the wealthy denizens of places like Malibu or Miami Beach, is also unsustainable. Yet the nature of the climate crisis is that ever-more people are finding themselves exposed to the disasters it’s strengthening. As droughts and extreme heat make fires worse, and warmer ocean temperatures make hurricanes stronger, companies will indeed find it impossible to insure them profitably.
Here’s where things start to get weird. As private companies opt to cut their losses in more climate-vulnerable places, states have showered them with incentives to stay. That’s included efforts to create state-backed insurers of last-resort—including California’s FAIR Plan and Florida Citizens—that step in to fill gaps left by the private sector. Conveniently for private insurers, these state-backed bodies necessarily carve off the riskiest, least profitable policies. That’s also why they seem to exist in a state of perpetual crisis, requiring frequent injection of cash and taxpayer-funded bailouts. It’s as if United Healthcare chose to stop offering coverage to people with a genetic predisposition to certain terminal cancers as those same cancers were suddenly becoming much more prevalent and aggressive among new, previously low-risk populations, and then the government created a public health insurer that only insured those patients.
When it comes to property insurance, this sets up a frustrating spiral with few obvious solutions: private insurers will back out of the riskiest markets and leave the state to pick up the riskiest policies, often in the hopes of appealing not just to insurance companies but also real estate developers. As Congress debates the future of the beleaguered National Flood Insurance Program—the country’s original insurer of last resort—Republicans are reportedly mulling an expansion of that approach to include a “new and different” program that might also cover fire, wind and hail damage.
As Republican North Carolina Senator Thom Tilli summed up on Monday evening, the “frequency and severity is such that we need to sit back and think through this in terms of insurance pools.” This isn’t the GOP’s worst response to the LA fires, of course: Speaker of the House Mike Johnson and other members of his party have raised the prospect of conditioning federal aid to the state’s fire victims as a thinly veiled jab at the Democrats who govern them, setting up a cruel, dangerous precedent whereby disaster aid becomes a political football.
Yet the tendency for lawmakers on either side of the aisle to continue responding to each new climate-fueled disaster mainly “in terms of insurance pools” raises an equally bleak prospect. Any reasonable, durable response to the fact that the climate crisis is reshaping our lives and cities would entail policy conversations that put corporate interests on the sidelines: limiting rather than subsidizing development in high-risk places; building more affordable, climate-resilient housing in areas that are less likely to burn and flood; protecting the public against opportunistic price-gouging on rents and insurance policies. Entrusting insurers and real estate interests to set the right price for climate adaptation and recovery means piling ever-more risk onto the public, exacerbating the inequalities on display in Los Angeles this week, and putting more people in harm’s way so that a few industries can continue to hoard profits and property.
