A grey, smoldering sea of ash, smoke and spindly chimneys is all that is left of much of the Palisades and Altadena neighborhoods of Los Angeles following devastating wild fires in early January. Yet structures in this fire-prone region are becoming less likely to be covered by insurance, not despite but because of climate change.

A recent episode of The New York Times podcast The Daily began with heartbreaking audio of residents of these neighborhoods discovering their homes had been destroyed. In the episode, Times climate report Christopher Flavelle explained that California has strong fire prevention measures, like outlawing certain plants within 100 feet of homes, and strict building codes that require using less flammable materials. The state also has a well-funded agency to predict fire-prone areas and highly trained fire fighters due to its long history of wild fires.

Yet this state that is arguably best equipped in America to handle wildfires was still underprepared for this extreme weather. Flavelle raises a crucial question: is it possible to do enough to prepare communities against fires that are getting worse due to climate change?

Adaptation and mitigation

One form of preparation is home owners insurance. “Having up-to-date insurance against natural hazards, such as wildfires, is generally recognized as a necessary preparedness or adaptation action”, says Sofiia Skipor, a second-year PhD student at the University of Gothenburg, Sweden who is spending two months with us here at the Environmental Psychology group.

Sofiia’s research explores why some individuals take actions to improve risk communication, shape better policies, and build a more resilient society, and why some individuals don’t. “Purchasing insurance may constitute an incremental yet important change toward being safe and adapting to possible risks.”

In their 2019 Global Commission on Adaptation Background Paper, “Climate change adaptation by individuals and households: A psychological perspective”, our colleagues Anne van Valkengoed and Linda Steg found that insurance is a form of climate adaptation because it limits damage in the event of extreme weather, but that could ultimately decrease people’s motivation to engage in other types of adaptation behaviour, which could ironically make it a maladaptive measure.

Maladaptive

“The purchase of insurance can form an effective strategy to reduce economic losses from climate-related hazards by distributing the risk among policyholders”, Van Valkengoed and Steg write. But “an increase in natural hazards due to climate change may increase premiums significantly and therefore make insurance unaffordable or even make particular properties entirely uninsurable.”

That has been illustrated in harsh detail in California this year, where insurance companies are either raising their premiums, withdrawing coverage or refusing to insure high risk properties in the first place. “Nearly 70% of State Farm property policy holders in Pacific Palisades learned last summer that they would lose their home insurance, months before the devastating Palisades Fire hit”, the San Francisco Chronicle reports.

Many states in the American west and south are facing similar threats. In a 2023 paper, researchers from the University of Colorado, Boulder studied how prepared Boulder residents were for wildfires and how aware they were of their own risk of losing property to fires.

“In Boulder County, 58% of residents live in a WUI [wildland-urban interface] area at risk from wildland fire”, the authors wrote. In the paper –
Assessing Household Wildfire Risk and Preparedness in Boulder – the researchers found that over half of all respondents (53%) were unsure if they currently pay a higher premium for their home insurance due to wildfire risk. They also discovered that most respondents (76%) are aware that their home insurance policy will cover damage from wildfire.

Uninsurable

How much of Los Angeles is WUI? Approximately 1,400 square kilometers of the city are classified as wildland-urban interface, which is roughly 13% of the county of Los Angeles, according to a 2022 paper published in Nature. In California, uninsured residents can join the Fair Access to Insurance Requirements (FAIR) Plan, which covers basic property. But given the sheer volume of structures destroyed in recent weeks, FAIR Plan policyholders who lost homes in this week’s fires “may struggle to be made whole”, according to The Independent.

Those are cases of residents whose existing properties have become uninsurable. But due to housing scarcity and the appeal of living in areas near nature, people are still moving to areas that are higher risk for flooding or wildfires en masse. In the United States, where extreme weather has destroyed homes from coast to coast in recent months, most realtors are not required to disclose the climate risks associated with a property.

According to US News and World Report, home hunters are encouraged to do their own due diligence before signing a mortgage, including using climate risk tools to evaluate how vulnerable a property is to climate change-induced weather extremes like precipitation, heat risk, drought, fire and flooding. But such tools rely on historic data, including outdated maps from government agencies that show where flooding or other natural disaster risks are higher.

Climate labels

All of this means that unlucky homeowners are left holding the bag of an unsellable, uninsurable and – in the worst case scenario – no longer existing home. To prevent this from happening in the Netherlands, in 2024, Dutch economic researchers proposed using climate labels on homes, based on the level of risk they face due to climate change-exacerbated weather. The idea is to raise awareness among home owners – and house hunters – of the actual financial risks to foundation damage due to drought or flood damage caused by extreme downpours. In many cases, the value of homes could decrease by at least 10% when these real costs are calculated for. But as of 2025 with a new governing cabinet in office, the status of this label is unclear.

All the while, flood risk is rising in the Netherlands. While the Dutch are globally famed for their comprehensive and innovative water management, that infrastructure was built based on sea rise predictions that have already been surpassed. As pointed out in a 2019 Politico article, “there is a point at which it doesn’t make financial sense to save the land.”

That means intentionally allowing controlled flooding of certain patches of land to be reclaimed by the sea, a reversal of the proud Dutch origin story of how the Netherlands were made. It would be an extreme form of adaptation: sacrificing the polder in the hope of keeping most of the country above water.

Proactive measures

De Volkskrant reports that not just flooding, but more intense storms and more frequent landslides are expected to become common occurances in the Netherlands because of climate change. A spokesman for the Dutch Association of Insurers told the paper that the industry is concerned about climate change causing more erratic weather, bringing with it more damage and more insurance costs.

On both sides of the Atlantic, and around the world, would-be homeowners need to adapt to and mitigate against increasingly dangerous weather caused by climate change. “To be effective, insurance should be paired with other proactive measures, such as signing up for alerts or preparing homes, and must remain accessible to lower-income populations”, Sofiia says.

Photo by Eugene Shelestov: https://www.pexels.com/photo/person-holding-burning-paper-in-dark-room-33930/