When Insurance Companies Walk Away: How Bluelining Drives Economic Inequity and What Policymakers can do to Stop it
It’s still early days of the Trump 2.0 administration but President Trump has wasted no time “flooding the zone” with unilateral actions designed to undermine and dismantle key federal government agencies. His directives are escalating the already high-stakes we face when it comes to how the country will grapple with the growing impacts–and costs–of climate change. By eliminating staff and revoking funding at critical agencies working on everything from disaster preparedness to consumer protection, this administration is setting the stage for a dangerous reality—one where climate disasters are more severe and frequent, and financial institutions are empowered to abandon communities in the devastating aftermath. But for me and so many others who have seen firsthand how climate change devastates neighborhoods, and how insurers and banks in particular withdraw support just when help is needed most—it’s clear that we cannot afford to continue down this path. And as we’ve already seen, this reality is hitting communities of color and low-income communities first and worst.
In Los Angeles, over 40,000 acres and 12,300 structures have burned, leaving an estimated 10,000 families displaced. For more vulnerable communities living in the path of the fires, what wealth had been accumulated over generations of work were wiped away in a matter of hours. With an estimated cost of all the loss hovering anywhere between $30 billion and an astronomical $250 billion, the financial repercussions of this calamity cannot be overstated. Paired with the estimated cost of Hurricane Helene damage in North Carolina alone being approximately $60 billion, it is clear the financial system needs to learn some lessons now or we risk sliding into a climate-fueled financial crisis.
The Insurance Crisis: A Predictable Meltdown
The insurance crisis that was already setting off alarm bells in California and North Carolina has reached a critical breaking point. In western North Carolina, so few people have flood insurance (most counties as little as 1%), with rural communities disproportionately underinsured, entire communities are left without recourse. Similarly, in California consumers have struggled for years to access homeowners insurance at all, with many homes going underinsured or uninsured due to the well-documented retreat of insurance companies from the state.
This lack of resilience is not an accident. It is the result of major institutions continually sidelining the needs of climate vulnerable communities for decades—communities that are disproportionately communities of color and low-income. Instead, insurance companies have steadily piecemealed coverage, withdrawn services, and raised prices in these areas. At the end of 2024, the Federal Insurance Office released the biggest dataset on insurance in history, noting that communities facing high risk of natural disasters face higher “nonrenewals,” a sanitized term for being dropped from insurance coverage. And in 2025 in the wake of the Los Angeles fires, insurance companies are turning to California taxpayers to cover costs they themselves are required to pay to the state’s insurer of last resort.
Even if sufficient federal and state aid materializes to assist homeowners without sufficient insurance coverage, there is no guarantee that insurers will return to underwrite these communities. Without insurance, banks and lenders may hesitate to provide financing, exacerbating the cycle of disinvestment. What happens, then, to the families who have called these places home for generations?
Bluelining: The New Redlining
The systemic failure of insurance companies is part of a broader pattern of financial abandonment. Historically, redlining systematically denied communities of color access to credit and insurance, reinforcing cycles of poverty and segregation. Today, we are witnessing a new, climate-driven variant: bluelining. This term describes how financial institutions, facing escalating climate risks, are pulling back coverage or drastically increasing rates for communities that are most climate vulnerable.
The parallels to redlining are striking. Once again, the communities most in need of investment are systematically denied support. Low-income neighborhoods of color—many of which were previously redlined—are disproportionately likely to face higher climate risk due to a lack of public and private investment in climate resilient infrastructure and displacement from more climate-safe regions. As a result, these communities also face higher risk of climate-driven financial discrimination.
When it comes to financial discrimination, insurance is merely a harbinger, the first financial service to withdraw. Without regulatory tools to challenge these withdrawals and compel insurance companies to continue serving these communities, bluelining threatens to deepen the cycle of disinvestment and abandonment by financial institutions that redlining created. This isn’t just a failure of the market; it’s an injustice that demands proactive intervention to prevent repeating racist history.
The Role of Insurance Companies in Climate Resilience
At its core, the insurance industry is in the business of risk management. Yet, insurers are choosing to walk away from communities rather than invest meaningfully in resilience measures to lower their own risk. This is a shortsighted approach that benefits corporate bottom lines at the expense of community survival. It’s also a failing strategy. By refusing to insure high-risk areas, insurers are driving entire regions into economic decline—worsening the very risks they seek to avoid.
We’ve been here before. In 1977, the federal government stepped in with the Community Reinvestment Act, requiring banks to invest in underserved communities. Today, policymakers and regulators must address emerging bluelining practices head-on and require insurance companies to better support communities.
Policymakers and regulators must require insurers to:
- Invest in climate mitigation and resilience: This includes funding flood mitigation efforts, strengthening infrastructure, and supporting community-based resilience programs. This should be codified at state and federal levels with Community Reinvestment Act-like requirements and examinations for insurers.
- Expand coverage options in high-risk areas: Rather than retreating, insurers should develop innovative policies that make coverage accessible and affordable in areas where traditional insurance policies may be challenging to underwrite. Parametric and community-scale products offer opportunities to fill coverage gaps for the most vulnerable communities.
A Call for Transformative Action
The stakes could not be higher. Families in North Carolina wonder if they will ever be able to rebuild, while residents in Los Angeles grapple with the loss of neighborhoods they’ve lived in for generations. How much longer can we sustain this broken system?
This moment presents an opportunity for transformative change. It’s past time for insurance companies to step up—not just as businesses, but as stakeholders in the future of our communities. If they fail to act, it will fall to families to pick up the pieces. This is not just about insurance policies. It’s about justice, survival, and the right of every community to a secure future.
