Insurers are pulling out of areas prone to climate risk
Bluelining is an insidious practice with similarities
to redlining —
the notorious government-sanctioned practice of financial institutions denying
mortgages and credit to Black and brown communities, which were often marked by
red lines on map.
These days, financial institutions are now drawing “blue
lines” around many of these same communities, restricting services like
insurance based on environmental risks. Even worse, many of those same
institutions are bankrolling those risks by funding and insuring the fossil
fuel industry.
Originally, bluelining referred to blue-water flood
risks, but it now includes other climate-related disasters like wildfires,
hurricanes, and severe thunderstorms, all of which are driving
private-sector decisions. (Severe thunderstorms, in fact, were responsible for
about 61 percent of insured natural catastrophe losses
in 2023.)
In the case of property insurance, we’re already seeing insurers pull out of entire states like California and Florida. The financial impacts of these decisions are considerable for everyone they affect — and often fall hardest on those in low-income and historically disadvantaged communities.
A Redfin study from 2021 illustrated that areas previously
affected by redlining are now also those prone to flooding and higher
temperatures, a problem compounded by poor infrastructure that fails to
mitigate these risks. This overlap is not a coincidence but a further
consequence of systemic discrimination and disinvestment.
This financial problem exists no matter where you live.
In 2024, the national average home insurance cost rose about 23
percent above the cost of similar coverage last year. Homeowners across more
and more states are left grappling with soaring premiums or no insurance
options at all. And the lack of federal oversight means there is little
uniformity or coordination in addressing these retreats.
This situation will demand a radical rethink of how we
approach investing in our communities based on climate risks. For one thing,
financial institutions must pivot from funding fossil fuel expansion to
investing in renewable energy, natural climate solutions, and climate resilience,
including infrastructure upgrades.
What about communities in especially vulnerable areas?
One strategy is community-driven relocation and managed retreat. By relocating communities to low-risk
areas, we not only safeguard them against immediate physical dangers but also
against ensuing financial hardships. Additionally, preventing development in
known high-risk areas can significantly decrease financial instability and
economic losses from future disasters.
As part of this strategic shift, financial policies must
be realigned. We need regulations that compel financial institutions to manage
and mitigate financial risk to the system and to consumers. We also need them
to invest in affordable housing development that is energy-efficient,
climate-resilient, and located in areas less susceptible to climate change in
the mid- to long-term.
Meanwhile, green infrastructure and stricter energy
efficiency and other resilience-related building codes can serve as bulwarks
against extreme temperatures and weather events.
The challenge of bluelining offers us an opportunity to
forge a path towards a more resilient and equitable society. We owe it to the
future generations to do more than just adapt to climate change. We also need
to confront and overhaul the systems that harm our climate. The communities
most exposed to climate change deserve no less.
Jessica Garcia is a senior policy
analyst for climate finance at Americans for Financial Reform Education Fund.
For more on bluelining, see Jessica’s two-part blog series at
OurFinancialSecurity.org. This op-ed was distributed by OtherWords.org.