California Insurance Commissioner Ricardo Lara (pictured) has released an in-depth report examining the uninsured and insured costs associated with recent extreme heat events in the state.
Titled “Impacts of Extreme Heat to California’s People, Infrastructure, and Economy,” the study – described by Lara’s camp as pioneering – emphasizes the critical need for adaptive strategies to counteract the escalating threat of extreme heat.
According to the report, the cumulative cost of the seven heat events that were looked at is initially estimated at $7.7 billion. It was found that labor productivity losses ranged from $7.7 million to $210 million per event due to extreme heat, with substantial uninsured wage losses.
Additionally, infrastructure costs due to heat-related damage and delays ranged from $3.8 million to $35 million per event, primarily affecting roads and rail. Health outcomes also disproportionately affected Black, Hispanic, and Native American communities, with significant mortality rates and heat-related illnesses.
Lara stated: “Extreme heat is a silent, escalating disaster that threatens our health, economy, and way of life in California. This report brings to light the staggering hidden costs of extreme heat events, underscoring the urgency of our efforts to create a groundbreaking heat wave ranking and early warning system statewide.
“We must prioritize resilience-building efforts and innovative insurance solutions to safeguard our state against the growing impacts and financial risks of extreme heat.”
The report presents a framework to evaluate the true costs of seven significant extreme heat events over the past decade, detailing both financial and human impacts.
While some insurance types, such as health cover, workers’ compensation, and crop insurance, provide some protection, significant gaps remain in traditional insurance coverage for heat-related losses. The report calls for the development of innovative insurance mechanisms and increased investment in adaptation and resilience.
It was pointed out that current losses are largely uninsured, placing the financial burden on individuals and public entities.
Kathy Baughman McLeod, chief executive at Climate Resilience for All and member of the California Climate Insurance Working Group, declared: “The data presented in this report is a wake-up call that we need immediate measures to protect lives. The far-reaching consequences of extreme heat require coordinated action across all sectors to accelerate equitable adaptation.”
The report emphasizes a multi-faceted approach to address the challenges posed by extreme heat. Recommendations include collaborating across public and private sectors to develop and implement heat-illness reduction strategies; exploring innovative insurance solutions to incentivize extreme heat resilience and cover business interruptions, infrastructure damage, and emergency services; and utilizing insights from local government case studies to inform future planning and mitigation policies.
Katelyn Roedner Sutter, California state director at Environmental Defense Fund, asserted: “As climate change intensifies, the costs of extreme heat on our health, lives, and economy are growing. It’s absolutely critical for California to monitor and reveal the enormity of otherwise hidden costs.
“Anyone who says California cannot afford climate action should flip through this report to learn why doing nothing is not an option.”
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