New Orleans is Uninsurable, Part 2

The progressive blogsphere is picking up a story that has not yet caught the attention of the major media. Over at MyDD and
Firedoglake they are lashing out at the decision by St. Paul Travelers Insurance not to renew its commercial insurance policies in New Orleans starting next year. This has stoked fears that St. Paul will be lead a flight by other companies out of New Orleans. This may well be the case.

In previous posts here, Florida Becomes Uninsurable Part 1 and New Orleans is Unisurable, I have discussed at length the price that will have to be paid for global climate change. Although many of the gross macroeconomic and geopolitical effects will not manifest for decades to come, I think that we can consider New Orleans the canary in the coal mine.


Many progressives and liberals insist that the levees be rebuilt; that the insurance companies be forced to insure these areas or that the federal government step in as the insurer of last resort. All of these proposals have their hearts in the right place. And all of them are dead wrong.

The people of New Orleans have been victimized in many ways; victimized by poor levee design, victimized by the devil-take-the-hindmost attitude of the federal government following Katrina. But most of all they are victims of fate, disastrous land use policies, and global climate change. In many ways they are the first to pay the dues for our industrial culture's massive carbon dependency. But they will hardly be the last.

Markets work because when not meddled with too much, they are pretty efficient. The insurance industry is -- despite its other micro-problems -- at the macro level a pretty efficient risk-assessment machine. What St. Paul Traveller's is essentially saying with its actions is: "it is our calculation that given the pace of levee reconstruction combined with the long-term prospects for more severe hurricanes and rising sea levels we cannot find any way to ever turn a profit in this region." That calculation is no doubt made by also looking at southern Louisiana in an aggregate context with other high-risk areas. Southern Louisiana on its own is a huge insurance risk that threatens to drag down policies in other areas that are not as threatened (yet).

As for the questions that are posed in many of the blog posts above such as what will become of the essential businesses in the region, many of which are crucial to our nation's energy and trade infrastructure. The answer is:

The bottom line is that old Mama Nature is going to re-assert her control over the coastlines. It will become economically impossible for people to maintain a presence along those coasts unless they fall into one of the following buckets: a) Individuals or companies wealthy enough to rebuild frequently, b) performing work or conducting business that is profitable enough to place them in Bucket A, c) performing work or conducting business that is unable to be done elsewhere and pass the costs of rebuilding on to customers, or finally d) Building (or re-building as the case may be) one's structures in the mode of Hitler's Atlantic Wall.

Many people I normally agree with say this is a typical case of big business sticking it to the little guy and playing pick-and-choose with regards to class. As blogger Athena puts it:

Look, I know somebody's gonna respond with risk-analysis graphs and such and I get it, I do, but the fact of the matter is that it's past time we stopped with the unconditional surrender in the class warfare that leads to these insurers saying eh, too bad, so sad, see ya later every time people actually need them to do what they exist to do and what you pay them every single month to do….

New Orleans is a tragedy, made worse by the fact that the worst effects were avoidable and FEMA's assistance efforts criminally negligent. The federal government can and should fulfill its commitments to assist people in resettlement or rebuilding. But it would be poor policy indeed to begin to either force insurance companies to carry insurance on property that has a nearly 100% likelihood of being destroyed again within our lifetimes or to saddle the government with the cost and to build the public expectation that when we literally reap the whirlwind of our carbon emissions Big Government will cover our bad bets.

Tragically, the people of Southern Louisiana are but the first to find out that their once enviable real estate is now situated a live-at-your-own-risk zone. But as the picture above says, their fate is ours. A fate that will be shared by millions of Americans and billions of human beings during my lifetime, the lifetime of my children and my children's children. Many of us just haven't come to grips with it yet. But it is high time we did.

It must start by those who live in the at-risk zones realizing that their property is on borrowed time. Sooner or latter the hammer will fall, the seas rise, the crops fail and if you don't have a Plan B you are basically fucked. And yes, I'm quite aware that many billions of people do not have the freedom, resources or other requirements to have an effective Plan B. That is why I'm in the shrill chorus of people who say that global climate change is the number one social, economic, and political problem facing the world today.