A conversation on risk, insurance and reinsurance
Marketplace All-in-One
Marketplace
4.5 • 1.4K Ratings
🗓️ 13 January 2025
⏱️ 8 minutes
🧾️ Download transcript
Summary
If insurers are buckling, and backup insurers are buckling, where’s the backup for the backup? Private insurers were exiting parts of California and other markets well before these current firees, causing millions of people to opt for state-run backup insurance plans. Those plans are also now buckling under pressure of intensifying natural disasters. So where do we go from here? We discuss. And later, we’ll interrogate some of the working conditions of Shein factory workers in China.
Transcript
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| 0:00.0 | If insurers are straining and backup insurers are straining, where is the backup for the backup? |
| 0:09.0 | From Marketplace, I'm Sabri Beneshore and for David Brancaccio. |
| 0:12.0 | The damage estimate for the Los Angeles area wildfires now stands it up to $150 billion, according to IQ weather. |
| 0:20.0 | Even worse, 24 people have lost their lives. Both numbers may rise. |
| 0:24.9 | Private insurers were exiting parts of California and other markets well before this fire, |
| 0:30.0 | causing millions of people to opt for state-run backup insurance plans. Those plans are also now |
| 0:37.3 | buckling under pressure of intensifying natural disasters. |
| 0:40.7 | Julia Coronado is president of macro policy perspectives and joins us to talk about this and more. |
| 0:45.5 | Hi, Julia. |
| 0:46.2 | Good morning. |
| 0:46.8 | I read in Time magazine a quote from California Assemblyman back in March saying that the backup insurance plan in California was, quote, |
| 0:58.3 | one bad fire season away from complete insolvency. Well, we are more than a bad fire season after |
| 1:06.7 | those comments. And I'm just wondering what happens now if insurance companies and backup state-sponsored insurance plans can't pay for all this. |
| 1:19.2 | Yeah, it's a significant event. And private insurance markets work when risks are uncorrelated. One house burns, but the house across the street does not. They cannot function when risks are uncorrelated. One house burns, but the house across the street does not. They cannot |
| 1:29.4 | function when risks like risks from climate change are highly correlated. And therefore, not just the |
| 1:37.1 | areas affected, but broader areas could lose access to home insurance. States probably won't have |
| 1:43.4 | the wherewithal by themselves to deal with |
| 1:45.9 | this. We're probably going to need to have a conversation about a national backstop insurance plan. |
| 1:53.3 | What exactly might that look like? Are we talking about reinsurance? Like, for example, |
| 1:58.2 | how private companies go to reinsurance companies, which is like |
| 2:01.1 | insurance for insurance companies? That's right. So it would be a plan. There would be a premium for that |
| 2:07.2 | plan. And it would kick in when there is a large scale loss. That is a highly correlated loss in an area |
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