Trump will soon see his administration engulfed by the climate crisis he so vigorously denies
Firefighter Arthur Merzdorf remembers “a hopeless fight against the sea of flames.” No, Mezdorf was not battling the firestorm consuming the once-idyllic Los Angeles suburb of Pacific Palisades this week. Long dead, he was a fireman in Dresden, Germany, facing a “volcanic bomb” of fire caused by 3,900 tons of incendiary bombs made with gas and diesel by Standard Oil (now Exxon).
Climate change really is financial risk
The Dresden-like firestorms raging across America’s second-largest city should give pause to anyone listening to President-Elect Donald Trump and his fellow fossil fuel travelers as they moon over “clean, beautiful gas” and make plans to execute an energy playbook developed by the American Petroleum Institute to increase oil and gas use dramatically. Rather than ushering in the second coming of oil and gas, Trump may soon find himself subsumed by the soaring costs of a climate crisis he so vigorously denies.
This week, Munich Re, the giant global reinsurance powerhouse, outlined the potential insurance costs of continuing to fuel the climate crisis. Munich Re reports that they expect the financial toll from natural catastrophe events in 2024 to be $140 billion, with economic losses at more than $320 billion—well in excess of the $94 billion inflation-adjusted average for the decade.
2024 may be a palette cleanser to what is in store in 2025.
The numbers look particularly bad for Trump and the United States. North America (including Central America and the Caribbean) bore the brunt of insured catastrophe losses again in 2024, at $108 billion. Hurricanes Helene and Milton alone tallied up $41 billion in insurance industry losses.
Unlike Trump, who refuses to link catastrophic storm loss to climate change, the world’s fifth-largest insurer does. The destructive forces of climate change are becoming increasingly evident as backed up by science. Societies need to prepare for more severe weather catastrophes,” warned Thomas Blunck, a Member of the Board of Management at Munich Re. Accordingly, he said Munich Re would expand and adapt its risk models to “maintain, and even expand, our substantial risk capacity.”
But 2024 may be a palette cleanser to what is in store in 2025. We are barely two weeks into the new year, and losses from the LA fires alone are expected to exceed $100 billion. “Climate change is taking the gloves off,” warned Munich’s Chief Climate Scientist, Tobias Grimm. “The physics are clear: the higher the temperature, the more water vapor and energy is released into the atmosphere. Our planet’s weather machine is shifting to a higher gear.”
Property insurance meltdown
No wonder insurance companies – and the American consumer – are freaking out. Across America, homeowners are waking up to a sobering new reality: The insurance they long assumed would protect their cozy suburban nest egg is increasingly pure fiction.
The insurance they long assumed would protect their cozy suburban nest egg is increasingly pure fiction.
California is at the epicenter of this rapidly growing crisis. Since 2020, private insurance firms have denied coverage to more than 3 million California homeowners, including one in seven in Pacific Palisades. Seven of the 12 top home insurers in the state paused or placed harsh restrictions on policyholders, and some insurers have raised premiums nearly tenfold.
Insurer of last resort
The hasty retreat of private insurers increasingly leaves California as the insurer of last resort. In recent years, the state-funded FAIR insurance program has seen a 164% increase in policies, with a 27% rise in just the past year.
For many victims of climate storms, FAIR’s policies will not make them whole on their most valuable financial asset – their home. FAIR will only cover damages up to $3 million. However, the average home price in Pacific Palisades is $4.5 million. Worse, unless there is a change in state or federal insurance policy, homeowners will find it impossible to sell their homes at today’s prices because new home buyers will not be able to get a mortgage or insurance to cover the cost of buying a home above $3 million.
“One lesson climate change teaches us again and again is bad things happen ahead of schedule.” It is a lesson Donald Trump will soon learn.
The numbers for the state of California are also dire for its fiscal future. FAIR Plan’s total exposure in Pacific Palisades alone is approximately $5.89 billion. Total insured losses from the Los Angeles fires are estimated between $20 and $57 billion. However, the FAIR Plan has only about $200 million in surplus cash.
Californians are not alone. As Trump enters office, more than 35.6 million properties, or approximately 25% of all US real estate, face higher insurance costs and lower coverage because of climate risk. Some 67% of American homeowners are now underinsured as insurance companies abandon storm-prone states like Florida and Texas.
Trump, however, made it clear last week that he sees no connection between climate change and the soaring cost of storm-related damage. But as Peter Kalmus, a climate scientist warned this week in The New York Times, “one lesson climate change teaches us again and again is bad things happen ahead of schedule.” It is a lesson Donald Trump will soon learn. That and the fact that he has no control over the ferocity of storms, no matter the cause. And these threaten to doom the climate-denying Trump Administration before it even starts.
Featured photo source: California Department of Forestry and Fire Protection