Climate change is making home insurance costlier and, for some, harder to secure. According to one analysis, one in ten Australian properties will be uninsurable within a decade.

Insurance is vital to help people recover after a disaster damages or destroys their home – enabling them to replace personal belongings and rebuild their homes and lives.

Historically, insurers have been required to determine risk – and set premiums – according to losses from past disasters. It has meant insurers cannot account for worsening climate-fuelled disasters, which are causing more damage to homes and triggering more insurance payouts.

In response, insurers around the world have generally raised premiums to cover their losses, excluded some risks from policies or withdrawn coverage from some high-risk locations entirely.

California has just taken a novel approach to this problem. There, insurers are now permitted to use forward-looking computer models of climate change and disasters when setting premiums – as long as they expand coverage in higher-risk areas.

Australia should explore this approach. It has the potential to keep home insurance prices stable, ensure coverage in risky areas, and make homes safer over time.

Even before the devastating LA wildfires in January this year, California’s home-insurance market was buckling after severe disasters and rising costs.

The increasing costs included “reinsurance”, which........

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