By Julia Zeigler

The Climate Insurance Working Group was enacted by legislation (SB 30 (Lara) (Chapter 614, Statutes of 2018)).  The new Working Group is to examine issues related to climate change, resilience, and insurance. The mission of this working group is to identify, assess, and recommend risk transfer approaches to reduce the risks of climate change impacts including, but not limited to, insurance incentives that promote nature-based solutions.

The group chose to focus on climate impacts from wildfire, extreme heat, and flooding. Drought was discussed but was not one of the top three. The working group met publicly eight times from 2019 to 2021 to develop the report and the recommendations contained therein. The group focused on exploring the role of “risk transfer tools” in managing these dangers to health and to property.  Also considered was the financial stability of local governments and businesses.

On July 16. 2021, the Climate Insurance Working Group released a draft report with recommendations on how to help protect against extreme weather and excessive costs associated with climate change in California. Climate-fueled costs and losses have the potential to cause substantial losses that burden communities and individuals and increase the protection gap between those with and without insurance coverage. Insurance can support rapid recovery from climate disasters and can provide incentives for reducing risk in communities.  It can also promote climate adaption. Investing in reducing future losses through risk reduction leads to more affordable insurance in the future since insurance costs obviously are exacerbated by increasing claims pled.

The California Department of Insurance has worked with its Climate Insurance Working Group to develop solutions to address these climate concerns. This report identifies four key elements of resilience-risk assessment and support for community preparation and risk reduction to reduce future losses. The recommendations include nature-based solutions and early recognition of danger, including:

• Development of early warning systems that better address heat threats, including their ranking by severity;
• Creation of state-wide hazard maps to communicate future risk from climate-worsened wildfires and flooding;
• Identification of risk mitigation opportunities to promote affordable and available insurance;
• Development of robust communication plans to improve preparations and response as well as to reduce harmful impacts to public health;
• Coordination of state-wide mitigation and resilience strategy, which makes incentives for risk reduction widely available;
• Improvement of local land-use decisions by investing in nature for risk reduction, rather than building;
• Increase in funding for the retrofitting of homes;
• Establishment of a pilot program for a basic level of disaster insurance to ensure underlying c coverage;
• Making nature-based insurance solutions a priority in local and state planning, as well as the focus of scientific study to include in models;
• Exploration of nature-based insurance solutions, such as investments in wetlands and floodplains, to reduce flood risk and also to manage open space buffers to provide protection from wildfires;
• Establishment of pilot projects offering insurance to address extreme heat impacts;
• For all perils, consideration of parametric insurance policies, including coverage for entire communities to guarantee that all residents have some degree of coverage. Community-level insurance pools the shared risks of the community and can provide financial incentives for community-wide investments in risk reduction.

The report ends with a timeline for the prioritization of its recommendations. As of this writing, the specifics of the next steps has not been determined.