Tired: MAGA. Wired: MGA!

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There are so many major climate reports that have come out recently, including the ambitious Global Justice Report from a team led Thomas Piketty (read the Guardian review) and the U.N. Environmental Programme’s Limiting Overshoot: Navigating exceedance of 1.5°C and pathways toward return (read Dr. Ayana Elizabeth Johnson’s review).

Below, we take a look at a climate report with the attention-grabbing title Strengthening State Oversight Over Surplus Lines. It’s sexier than it sounds!

As fossil-fueled climate disasters blow up their business model, insurers are looking for ways to provide “coverage” that sidesteps homeowner-protecting regulations. Jordan Haedtler and Aisha Saad break this down in a new report on the burgeoning dependence on insurance “surplus lines” for American home insurance. Brianna Sacks at the Washington Post wrote this week about the explosive growth of surplus lines, and Haedtler and Saad’s report explains how this trend is empowering the insurance industry to “privatize gains and socialize losses as climate change intensifies.”

Investors and climate adaptation specialists look at surplus coverage somewhat differently, and some believe that surplus affiliates known as Managing General Agents (MGAs) can be a solution to the problems fossil fuel pollution is causing in the insurance industry. The optimistic perspective on new climate MGAs like Neptune Flood (flooding, natch), Althea (wind and storm damage), Kettle and Delos (wildfire), Ocean Ledger (coastal flooding), and Adaptive (power outages) is that their business can succeed with modern modeling to help homeowners to make affordable climate-adaptation investments that then make their houses insurable, for example by following the insurance industry’s Fortified roofing standard.

The pessimistic angle is that the big insurers are using MGAs as pass-throughs to jack up industry profits, avoid oversight, and engage in other financial chicanery to ensure (pun intended) their executives are high and dry but the public is soaked when the inevitable perfect storms hit.

As Louie Woodall writes in Climate Proof, “A string of climate-related disasters could expose flawed modeling, incurring huge losses on capacity providers and prompting others to flee the space entirely.”

Of course, the people relying on this Jenga-tower of deregulated insurance to rebuild and recover from the disasters would have nowhere to flee.

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Thumbnail image by Kevin Key.