California’s FAIR plan insurance coverage has ballooned to $750bn as wildfires and climate risks force states to confront who should bear catastrophic insurance costs. State Senator Scott Wiener argues fossil fuel companies must pay for climate-linked disaster losses through litigation, citing $40bn in global losses last year tied to wildfires. His bill, which failed a committee vote, reflects growing frustration as taxpayers and policyholders shoulder rising premiums while insurers retreat from high-risk areas.

Wiener’s proposal is part of a broader trend in states like New York and Hawaii pushing fossil fuel firms to fund climate adaptation. Meanwhile, Florida’s state-owned Citizens insurer—once covering $618bn in 2023—has collapsed to $98bn after reforms aimed at reducing payouts. Critics warn such cuts leave homeowners vulnerable to underinsured risks. Stanford academic Simona Meiler’s study highlights systemic flaws: state-backed schemes like California’s FAIR plan now require $1bn in emergency funding after last year’s fires, risking further premium hikes. These interventions create moral hazard, potentially discouraging climate resilience investments as lenders and developers rely on guarantees rather than risk mitigation.

Europe offers alternatives through mandated reinsurance pools. The EU’s proposed system combines premium-funded risk sharing with government backstops, while Germany’s Elementar Re pool targets high-risk properties with a €30bn stop-loss. France doubled its natural disaster surcharge to 20%, reflecting chronic losses. However, UK’s Flood Re scheme faces backlash for stifling market signals, as lenders benefit without investing in resilience. The core challenge remains: balancing financial protection with incentives for climate adaptation. Without systemic reforms, governments may face unsustainable liabilities as climate risks escalate, forcing harder choices between public spending, private industry, or community displacement.