As climate change makes extreme weather events more intense and frequent, “uninsurable areas” are becoming increasingly common. They are a clear demonstration that insurance – the mechanism through which modern societies deal with all kinds of risk – is structurally underprepared for this new climate era.

Uninsurable areas refer to places where property insurance has become either impossible to get or to afford. This can happen because insurers are not offering coverage in a high climate risk area (due to coverage limits or market withdrawal), or because they offer insurance at premiums so high that most residents simply cannot pay them.

One of the clearest examples of an uninsurable area to date comes from California. In 2024, State Farm, one of the largest home insurers in the United States, chose not to renew 72,000 home insurance policies across the state due, in part, to unsustainable wildfire risk.

It was not alone, as six of California’s twelve largest insurers had already paused or heavily restricted new policies. Homeowners who can no longer find private coverage are directed to California’s insurer of last resort, the FAIR Plan, which grew from around 271,000 policies in force in 2022 to over 684,000 by March 2026, a 152% increase.

Since it offers less coverage than private insurance policies, the FAIR Plan was never intended to become a primary insurer. It nearly collapsed under the weight of claims from the January 2025 Los Angeles wildfires, and only survived thanks to a $1 billion emergency bailout.

In Europe, concern over the protection gap – meaning the share of disaster losses that insurance does not cover – is rising. According to EIOPA, the EU’s insurance regulator, 75% of economic losses from natural catastrophes in Europe have historically gone uninsured.

In Germany, the national insurance association........

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