7.7 billion dollars in damage from extreme heat in California: Commissioner Lara

Insurance Commissioner Ricardo Lara has released a comprehensive report revealing $7.7 billion in damages from extreme heat events in California and underscoring the urgent need for adaptive strategies to address this growing threat.

Commissioner Lara said, “Extreme heat is a silent, escalating disaster that threatens our health, our economy, and our way of life in California. This report brings to light the frightening hidden costs of extreme heat events and underscores the urgency of our efforts to create a groundbreaking heat wave ranking and a statewide early warning system.”

He added: “We must prioritize resilience-building efforts and innovative insurance solutions to protect our state from the increasing impacts and financial risks of extreme heat.”

The report's key findings show that extreme heat events result in significant productivity losses, ranging from $7.7 million to $210 million per event, as well as significant lost wages without insurance coverage. In addition, power outages during these events have significant economic impacts. Infrastructure repair and delay costs due to heat-related damage range from $3.8 million to $35 million per event, with roads and railroads being particularly affected. In addition, low-income communities and communities of color are disproportionately affected by extreme heat, exacerbating existing inequalities.

Kathy Baughman McLeod, CEO of Climate Resilience for All and member of the California Climate Insurance Working Group, emphasized: “The data presented in this report are a wake-up call that we need immediate action to protect lives. The far-reaching impacts of extreme heat require coordinated action across all sectors to accelerate just adaptation.

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“We need to integrate climate-friendly measures into our planning and invest in strategies that build the resilience of our communities to future heat events.”

The report calls for a multi-pronged approach to address the challenges posed by extreme heat. A key recommendation is to explore innovative insurance solutions to promote resilience and cover business interruption, infrastructure damage and emergency services during extreme heat events.

Katelyn Roedner Sutter, California state director of the Environmental Defense Fund, noted, “As climate change intensifies, the costs of extreme heat to our health, lives and economies are rising. It is critical for California to monitor and disclose the enormous costs that would otherwise remain hidden.”

She continued, “Anyone who says California can't afford climate action should read this report to learn why doing nothing is not an option. Extreme heat alone costs Californians billions of dollars. Because most of these costs aren't covered by insurance, our small businesses and working families on tight budgets are most at risk. To build a safer and more prosperous future, California must double down on proven solutions to reduce heat intensity in our communities, such as expanding the urban tree canopy and increasing access to green space.”

Louis Blumberg, a member of the California Climate Insurance Working Group, said, “This important and innovative report documents the enormous scale of the financial and social impacts of California's extreme heat and reveals the large gaps in the economy's insurance needs. With this new cost data from multiple sectors, the report calls on leaders at all levels to redouble their efforts to protect citizens from the ever-growing threat to public health and safety, particularly in low-income communities and communities of color.

“The sensible recommendations provide a clear basis for more research, innovation and action.”

Mike Lynes, director of policy at Audubon California, said, “Greening our communities means more shade in our neighborhoods, reduces the impacts of extreme heat events and saves lives.

“Investing in our urban forests means more trees, parks and green spaces – they beautify neighborhoods, provide more opportunities for outdoor recreation and create much-needed habitat for birds.”

Jonathan Parfrey, Executive Director of Climate Resolve, said: “Commissioner Lara's groundbreaking study, 'Impacts of Extreme Heat on California's People, Infrastructure and Economy,' quantifies for the first time the costs of past heat waves. The study's admittedly conservative estimates are nonetheless staggering. The loss in labor productivity alone should be a wake-up call for industry and policymakers. The lesson is that investing in cooling solutions today will save money and lives tomorrow.”

Nuin-Tara Key, Senior Advisor and Strategic Consultant at Key Strategies, added, “This report not only sheds light on the devastating impacts of California’s extreme heat on human health and the economy, but also provides, for the first time, insights into solutions that both close the protection gap for those most vulnerable to extreme heat and encourage investments in resilience that reduce costs and save lives.”

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