Comment by wjnc | Hacker News Reader

Comment by wjnc | Hacker News Reader

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Wow, eye-opening, especially reading up on the wiki [1]. If the state-sponsored insurer of last resort ask about 40% of the going actuarial rate, that suggests in the long run Florida's insurance market will be collectivized. This seems to be Florida state taking on immense financial risks due to the combination of climate change and unsound regulations.

I'm not gloating though. I think what's happening to Florida right now (sea level changes, hurricanes, uninsurability) is what will happen to for example Amsterdam in a few decades. Flood risks are mostly uninsured in the Netherlands, while hurricane risks seem insured in Florida. I don't see house prices correcting for flood risks in Amsterdam, even though the risk of going under seems well inside the time boundary of current sales / mortgages. People are myopic and seem to expect states to handle all adverse effects of risk, both in the Florida case ("Florida residents already pay too much for insurance"), and in the Dutch case (no insurance, but we'll get bailed-out, right?).

[1] https://en.wikipedia.org/wiki/Citizens_Property_Insurance_Co...

Insurance, whether public or private, is inherently a form of collectivization. People pool their resources to socialize the costs of catastrophe to protect the unfortunate few.

If Florida was a nation, "nationalized" might be a better term. And since Florida is too big to fail, the federal government would certainly come to their rescue after the inevitable catastrophe. So this really is back-door nationalization, a sneaky way to force taxpayers in New York, New Jersey, Illinois. Virginia and California to assume the risk of Florida's policies of climate-change denial.

It's a cynical game of chicken with climate change. By propping up its insurance market with artificially low rates, the state kicks the can down the road in the same way that big banks did before the 2008 collapse. The state and their propertied class profit today, delaying the inevitable reckoning with reality, and transferring the risk of their bad decisions to taxpayers.

It's a bail-out. But instead of blue-state taxpayers injecting cash into Florida today, they're unwittingly and involuntarily underwriting the risk that the state of Florida and wealthy Palm Beach property owners have assumed on their behalf.

> since Florida is too big to fail, the federal government would certainly come to their rescue after the inevitable catastrophe

This is far into untested territory. States have no clear route to bankruptcy. That’s far from being “too big to fail.”

Depending on who’s in power in D.C., a federal rescue of Florida on the back of an insurance failure could come with a significant cost.

> Florida state taking on immense financial risks

Andrew’s insured losses in Florida were $15bn ($34bn in 2024 dollars); today “3.7 million residences would be in the path of an Andrew-like storm…with a total replacement value of more than $900 billion” and “insured losses [over] $72 billion” [1].

Florida’s budget, for context, is about $120bn [2].

[1] https://www.insurancejournal.com/news/southeast/2022/08/24/6...

[2] https://www.flgov.com/wp-content/uploads/2024/06/Budget.pdf

This is great data to share to rapidly frame the situation and the risk, and the worrisome part is that Florida can continue on its course relying on federal government funding whenever there is a disaster through disaster declarations. Some sort of back pressure mechanism is needed to dissuade folks from moving to high climate risk areas, but that is in direct conflict with states with high climate risk incentivizing and desiring economic activity through mass migration to them.

I suppose the bright side of this is that the general fund is funded by federal tax due of the top 40% of US taxpayers, so there is a very coarse progressive taxation mechanism to this climate cost liability. Still not great!

> Some sort of back pressure mechanism is needed to dissuade folks from moving to high climate risk areas

Isn’t that in the gap between $900 and 77bn?

How does that stop a business or individual from moving to Florida? It will not be until a loss at scale occurs that sadness will be realized.

> How does that stop a business or individual from moving to Florida?

It doesn’t. It means when their town gets swept out to sea, they’ll be on the hook for 90% of the cost of rebuilding. That will presumably reduce their numbers.

I fear by then it will be too late, and these rugged individualists will be putting their hand out for socialism help after their poor choice. I would like to hope there is enough political will to tell them to pound sand and grab their bootstraps, but, you know. It is the third most populous state in the US with ~22.9M inhabitants (as of this comment), so its possible we get dragged by these folks. Hard to predict the future in this regard due to politics involved.

Thank you. I see your point. It's only one year of fiscal budget. That's not immense, but only impactful. I was putting some (actuarial) things I know little of together in my mind. US state pensions being unfunded, large risks being handed over to state insurers. Quite different than EU, in actually the opposite way than I'd imagine.

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