Why Insurers Are Pulling Out of High-Risk Areas

This podcast episode delves into the topic of spatial hazard events and losses, focusing on the Spatial Hazard Events and Losses database (sheldus) that tracks and records natural disaster events and their impacts in the United States. The guest, Melanie Gaul, provides valuable insights into the role of this database in understanding patterns, trends, and costs associated with different types of hazards. The episode also explores the complexities of the insurance market and challenges faced by homeowners in disaster-prone areas. The importance of government intervention and public funding in providing insurance coverage is discussed. Furthermore, the chapter emphasizes the significance of data-driven approaches in managing and mitigating natural disaster risks. Overall, the episode sheds light on the critical role played by the sheldus database in informing decisions to protect communities and properties from the impact of natural disasters. Main points • The Spatial Hazard Events and Losses database (sheldus) tracks and records spatial hazard events and losses across the United States, providing valuable insights into the patterns, trends, and costs associated with different types of hazards. • The increasing complexity of the insurance market in the face of rising natural disaster risks is discussed, with a focus on flood damage, property insurance, and the challenges faced by homeowners in disaster-prone areas. • Government intervention and public funding play a crucial role in providing insurance coverage and mitigating the impact of natural disasters. • The importance of data-driven approaches in managing and mitigating natural disaster risks is highlighted, emphasizing the role of databases like sheldus. • Accurate measurement of disaster losses, including direct and indirect losses, is essential for effective contingency planning and risk assessments. • The rising costs of natural disasters and the insurance landscape associated with them are explored, discussing the complexities of insurance coverage, reinsurance, and navigating different layers of insurance in disaster-prone areas. • The regulatory variations in different states regarding insurance requirements, disclosure requirements, and coverage limitations are discussed, with a focus on Florida and Louisiana. • The challenges of pricing insurance policies accurately in the face of increasing natural disasters are highlighted, including the lack of coverage for certain hazards like landslides. • The factors influencing people's decisions to purchase insurance and move after experiencing a disaster are explored, considering the role of experience, limited resources, and attachments to the current place of residence. • The role of policy levers in influencing insurance markets, attracting carriers, and ensuring affordability and availability of coverage is analyzed. Moreover, the potential need for government involvement in risk reduction and flood insurance is discussed.