How is climate change impacting the US insurance industry?

Climate change has been identified as a key driver of the insurance crisis, as rising global temperatures have led to more frequent and severe weather events like hurricanes, floods, and wildfires, causing massive insurance payouts and forcing companies to rethink their policies in certain locations.

How has the insurance crisis affected homeowners in California?

The increased risk of wildfires and other severe weather events has caused private insurance companies to raise their rates to unsustainable levels for many people in California, or to leave the state completely. This has forced many homeowners to turn to state-run insurance plans, which are now facing their own financial challenges.

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Extreme Weather Drives US Insurance Markets to the Brink

Q: What steps are states taking to address the insurance crisis?

To counter the crisis, some states like California have created state-chartered insurance plans like the FAIR Plan, which uses policy premiums to pay out claims when needed. However, these plans are struggling to keep up with the mounting claims, leading experts to question their long-term viability.

16 Nov

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Summary

Private insurers flee high-risk states like California
State-run insurance plans struggle to cover mounting claims
Climate change identified as a key driver of the crisis

Extreme Weather Drives US Insurance Markets to the Brink

As of November 16th, 2025, a growing number of extreme weather events and natural disasters have pushed insurance markets across the United States to the brink, potentially impacting millions of homeowners. The crisis has hit several states particularly hard, most notably California.

An increased risk of wildfires and other severe weather events has caused many private insurance companies to raise their rates to unsustainable levels for many people, or to leave states completely. In 2023, State Farm announced it would no longer offer new homeowner's insurance policies in California due to the heightened risk of fire and other disasters.

To counter this, California created a state-chartered insurance plan called the FAIR Plan, which uses policy premiums to pay out claims when needed. However, the number of policies under the FAIR Plan has nearly doubled, and its total liability is nearly $700 billion, leading experts to question whether the plan will soon run out of money, forcing insurance companies and policyholders to pay out claims.