Some US States Want Fossil Fuel Companies to Help Pay for Climate Disaster Insurance Costs

Some states in the US are trying to make fossil fuel companies pay for the higher insurance costs from climate disasters like floods and fires. Laws are being made to help people and states deal with these rising costs.
By Newsroom | Environment, Business |

In response to escalating insurance premiums driven by climate-related disasters, lawmakers in several US states are exploring new legislative measures. These proposals aim to hold fossil fuel companies accountable by allowing legal action to recover the costs associated with increased insurance expenses. The focus is on shifting financial responsibility for climate impacts, from rising wildfires to floods and sea-level rise, which are straining state budgets and impacting homeowners.

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Timeline and Key Actors:

  • Recent Legislative Activity (Late 2025 - Early 2026): Bills have been introduced in California, Hawaii, and New York to address rising insurance costs linked to climate change.

  • Fossil Fuel Industry Opposition: Groups like the Western States Petroleum Association (WSPA) are actively opposing these legislative efforts, particularly in California.

  • Prior Efforts: Previous attempts, such as "climate Superfund" bills in California, have faced similar debates.

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Central Issue: Climate Disasters and Insurance Premiums

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  • Climate change is demonstrably linked to an increase in the frequency and severity of natural disasters.

  • These events lead to more frequent and costly insurance claims.

  • Consequently, insurance companies are raising premiums or withdrawing coverage in high-risk areas.

  • This creates an "insurance crisis" where homeowners struggle with affordability and availability of coverage.

Legislative Proposals: Shifting Liability

States are considering different mechanisms to achieve their goal of making polluters pay for climate-related insurance increases.

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  • Empowering Attorneys General: Bills in California and New York propose authorizing their respective attorneys general to sue fossil fuel companies. The aim is to recoup costs incurred by residents due to soaring insurance premiums resulting from climate disasters.

  • Insurer's Right to Sue: In Hawaii and New York, proposed legislation would also grant insurance companies a new legal pathway to sue the fossil fuel industry. This would enable insurers to recover their own losses stemming from climate-related disasters on behalf of their policyholders.

  • "Climate Superfund" Concept: Several states, including California, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey, Oregon, Rhode Island, Tennessee, and Virginia, have seen "climate Superfund" bills introduced. These typically aim to make major fossil fuel producers liable for their contributions to climate pollution and subsequent damages.

  • California's Specific Bill: Senator Scott Wiener's proposed bill in California would explicitly grant the state attorney general the power to pursue legal action against fossil-fuel companies. The funds recovered would then be directed towards mitigating home insurance costs across the state.

Evidence of Climate Impact on Insurance Markets

Data and observations from various sources underscore the growing connection between climate change and the insurance industry.

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  • Rising Non-Renewal Rates: A report from the U.S. Senate Committee on the Budget highlighted that climate change is driving an increase in insurance non-renewals. Even if currently low in absolute terms, experts warn that rising non-renewal rates can signal future market destabilization. States and counties most exposed to climate risks, like wildfires and hurricanes, show the highest rates and growth in non-renewals.

  • Increasing Claim Frequency and Cost: More frequent and severe climate-related disasters directly translate into a higher volume of insurance claims, with each claim often being more expensive than in the past.

  • Hawaiian Context: In Hawaii, lawmakers have concluded that the operations of fossil fuel companies have "significantly contributed to the destabilization of the state's insurance industry." Despite having lower average home insurance costs than the national average, premiums have been on a sharp upward trend.

  • Public Perception: Polling data suggests that voters are increasingly experiencing climate impacts and strongly support holding oil and gas companies financially responsible for climate damages. Rising insurance rates are a particular concern for many voters.

The push to hold fossil fuel companies accountable is framed by arguments concerning their historical role in emissions and alleged deceptive practices.

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  • Contribution to Emissions: Research is emerging that aims to quantify fossil fuel companies' contributions to historical emissions and the extent to which climate change has caused or worsened natural disasters.

  • Allegations of Deception: Hawaii's resolution specifically states that "Big Oil 'knowingly engaged in misleading and deceptive practices regarding the connection between their products and climate change.'"

  • Financial Disconnect: The argument is made that fossil fuel companies continue to generate substantial profits while taxpayers bear the escalating costs of climate change. This is particularly relevant as federal climate funding has faced potential reductions.

  • Scientific Consensus: Advocates point to the scientific consensus that increasing carbon emissions, largely from fossil fuels, are worsening weather events and destabilizing the climate.

Opposition and Potential Challenges

The legislative efforts face considerable opposition and are likely to encounter significant legal hurdles.

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  • Industry Opposition: Organizations representing the oil and gas industry, such as the Western States Petroleum Association, are actively campaigning against these measures.

  • Anticipated Legal Battles: Experts anticipate that "climate Superfund" policies, in particular, will lead to "bruising legal battles." The legal basis for holding companies responsible for decades of emissions and their link to specific climate events is complex.

  • Debate on Causation: While the link between emissions and overall climate change is scientifically established, proving direct causation for specific disaster-related insurance losses to individual companies may prove challenging in court.

Expert and Advocate Perspectives

Advocates and policymakers frame these initiatives as necessary steps to address climate impacts and protect consumers.

"It seems entirely natural to have our insurance companies recover costs from those who knowingly contributed to making those conditions worse and driving these events."— Hawaiian Lawmakers

"The state joins a wave of similar efforts across the country to hold fossil fuel companies accountable."— Sierra Club

"As taxpayers shoulder the growing costs of climate change, the fossil fuel companies responsible for billions of dollars in climate damages continue raking in record profits…"— National Caucus of Environmental Legislators

Conclusion and Future Outlook

The introduction of legislation in California, Hawaii, and New York signifies a determined effort by state governments to find novel ways to finance climate resilience and manage the economic fallout of climate-driven disasters. By attempting to hold fossil fuel companies legally and financially accountable for rising insurance costs, these states are directly confronting the link between historical emissions and contemporary climate impacts.

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The proposed measures, which range from empowering state attorneys general to sue polluters to granting insurers the right to recover losses, aim to alleviate the burden on taxpayers and homeowners. However, these initiatives are expected to face significant opposition from the fossil fuel industry and are likely to trigger complex and protracted legal challenges. The outcomes of these legislative battles and subsequent court cases will be closely watched as other states and jurisdictions grapple with similar climate-related financial pressures. The effectiveness of these "polluters pay" models in stabilizing insurance markets and addressing climate adaptation funding remains to be seen.

Sources:

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Frequently Asked Questions

Q: Why are insurance costs going up?
Climate change causes more natural disasters like fires and floods. This makes insurance claims more expensive.
Q: Which states are doing this?
California, Hawaii, and New York are among the states looking at these laws.
Q: What do these laws want to do?
They want to make fossil fuel companies help pay for the costs of climate disasters and higher insurance prices.
Q: Will this be easy?
No, the fossil fuel industry is against these laws, and there will likely be legal fights.