Climate Risk, Insurance Retreat, and State Response

59 Pages Posted: 16 May 2024

See all articles by Mark Nevitt

Mark Nevitt

Emory University School of Law

Michael Pappas

University of Colorado Law School

Date Written: May 16, 2024

Abstract

Climate change is fundamentally destabilizing the private insurance industry, with many high-profile insurance companies exiting states in the face of catastrophic, climate-induced risk. This rapid “insurance retreat” represents a major market signal in response to climate-exacerbated risks. Private businesses are making actuarial decisions, assessing that some locations are just too vulnerable to insure. At the same time, this insurance retreat also poses a policy challenge for states as they react to the mounting insurance gaps left by exiting private insurers.

This Article analyzes insurance retreat, its attendant policy challenges, and the lessons that can be drawn from state responses. It first describes the causes and effects of private insurance retreat. Then, the Article examines different potential policy responses to insurance retreat, including interventions modeled after the federal National Federal Insurance Program (NFIP) as well as state insurance programs in California, Florida, and Louisiana. Finally, the Article offers a comparative analysis of these different policy response options. It observes that existing policies differ substantially along two important dimensions: 1) extent of government intervention, and 2) prioritization of physical risk concerns versus financial transition concerns. It also explores how the different state programs show surprisingly diverse policy approaches and how—contrary to assumptions—many do not actually subsidize insurance affordability. Through these observations, the Article uncovers unexpected examples of state insurance policies complementing, rather than contravening, pricing signals sent by private insurance retreat.

Keywords: climate change, insurance law, disaster law, retreat, environmental law, National Flood Insurance Program, California, Louisiana, Florida, Citizens

Suggested Citation

Nevitt, Mark and Pappas, Michael, Climate Risk, Insurance Retreat, and State Response (May 16, 2024). Georgia Law Review, Forthcoming, U of Colorado Law Legal Studies Research Paper 24-18, Available at SSRN: https://ssrn.com/abstract=4830733

Mark Nevitt (Contact Author)

Emory University School of Law ( email )

1301 Clifton Road
Atlanta, GA 30322
United States

Michael Pappas

University of Colorado Law School

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