As wildfires rage more frequently across the western United States, the fallout from earlier disasters in Los Angeles reveals a deeper crisis: the growing tendency to privatise climate risks is leaving many victims without reliable protection. In the aftermath of destructive fires in early 2025, affected residents are now mired in bureaucratic confusion, stuck between insurance firms, federal agencies, and state offices with little clarity or support.
This breakdown isn’t just administrative. As Prakash Kashwan argues in a recent analysis, it reflects a broader failure to redefine the relationship between private capital and public responsibility in an era of escalating climate disasters.
A fragile system under strain
Wildfires, floods, and hurricanes are now redrawing the boundaries of what’s insurable. In California and beyond, home insurance markets are struggling to cope. Many proposed solutions focus on individual responsibility such as informing buyers of flood histories or wildfire risk, or requiring upgrades to qualify for insurance effectively pushing the burden onto homeowners.
Agencies like Fannie Mae have started factoring climate risks into mortgage underwriting, reinforcing the message that buyers must “internalise” climate risks. But critics warn that this strategy is flawed. Asking individuals to shoulder the costs of collective failure may not only be unjust it may destabilise the system itself.
For example, one in ten properties insured under the US National Flood Insurance Program may soon face rate hikes of at least 300%. In parts of Florida and Louisiana, premiums could rise so sharply that some homes become financially worthless.
Inequality in response, inequality in impact
Privatised climate risk responses also deepen inequality. During the LA wildfires, the wealthiest households secured their properties with private firefighting services, while ordinary communities burned. These individual responses disrupted coordinated public efforts, adding confusion to an already chaotic situation.
Meanwhile, the financial burden on local governments is growing. Municipalities rely heavily on property taxes, which are vulnerable to sharp declines as property values fall due to climate risks. At the same time, they must bear rising costs rebuilding roads, power lines, and other infrastructure destroyed in disasters. In Los Angeles alone, wildfires in early 2025 caused at least $350 million in damage to public infrastructure, not including losses from the later Eaton fire.
Without systemic support, local governments are left trapped facing both reduced revenues and rising expenses, with limited ability to fund climate adaptation or recovery.
Breaking the insurance model
Climate change is not just a challenge to infrastructure or policy it undermines the very logic of the insurance industry. Insurance relies on spreading risk across geography and time, assuming disasters are rare and random. But with climate change, disasters are becoming frequent, concentrated, and systemic. Risk pooling the foundation of insurability begins to collapse.
In worst-hit regions, private insurers are pulling out. In others, premiums are becoming unaffordable. The result? A growing number of homes, businesses, and even entire communities may soon be uninsurable.
What next?
This growing crisis has reignited calls for a broader rethink. Proposals like “managed retreat” moving people out of high-risk areas are gaining attention. But without structural change, these strategies risk leaving the most vulnerable behind.
Real solutions require:
•reducing local government dependence on property taxes,
•strengthening public funding for disaster recovery and resilience,
•reshaping how risks are shared between private actors and the state.
Most importantly it requires public engagement. Broad-based support is needed to push for reforms that protect vulnerable communities and ensure that climate responses are equitable, not just efficient.
As Kashwan concludes, navigating a climate-changed world means confronting the uncomfortable links between private interests and public obligations. Without that reckoning, climate disasters will continue to punish the unprepared and the unprotected most.