Money For the Rest of Us

Who Should Bear the Cost? Socialized versus Market-Based Risk Management

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Natural disasters are becoming more severe and costly—who should bear the financial burden? We explore the tension between socialized risk and market-based insurance.

Topics covered include:

• The surprisingly large percentage of natural disaster losses that are uninsured
• Why natural disaster severity is increasing
• A deep dive into the complexity of the home insurance market, including state-run home insurance plans
• How California has tried to update its home insurance regulations, leading to potentially greater coverage but higher premiums
• How socialized insurance relieves the cost burden to consumers but can also lead to riskier behavior and adverse risk selection

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Show Notes

California wildfires: What we know about L.A.-area fires, what caused them, who is affected and more by Tim Stelloh, Marlene Lenthang, Rebecca Cohen and Phil Helsel—NBC News

Climate change is showing its claws: The world is getting hotter, resulting in severe hurricanes, thunderstorms and floods—Munich RE

Shaping the Future of Wildfire Insurance in California: New Insights from the Most Comprehensive Wildfire Risk Model in the Market by Firas Saleh—Moody’s

Insurers’ Rule Change Puts California Homeowners on the Hook for L.A. Fire by Jean Eaglesham and Sara Randazzo—The Wall Street Journal

Commissioner Lara issues landmark regulation to expand insurance access for Californians amid growing climate risks—California Department of Insurance

California Was Already in Home-Insurance Crisis Before Los Angeles Infernos by Jean Eaglesham and Joe Flint—The Wall Street Journal

The World Is Getting Riskier. Americans Don’t Want to Pay for It. by Greg Ip—The Wall Street Journal

Reinsurers little exposed to LA fires after retreat from disaster risks by Lee Harris—The Financial Times

A Survey of Residual Market Plan Assessment and Recoupment Mechanisms by Nancy Watkins, Robert Lee, and Rehan Siddique—Milliman

Related Episodes

481: How to Navigate the Crippling Home Insurance Crisis

444: Natural Disasters: Are They Truly Increasing? 

Investments Mentioned

Stone Ridge High Yield Reinsurance Risk Premium fund (SHRMX)

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