Is the world becoming uninsurable?

The problem is that in American home-buying, insurance is often compulsory for a purchase with a mortgage. This makes sense from the bank's perspective--they want to insure their collateral. However, the system doesn't really have an answer for "what happens when their collateral becomes uninsurable?" Even though lenders have force-placed insurance, even those insurers can deny coverage in certain circumstances (e.g. flood plain). This puts insurers in a position to de-facto foreclose on not just one person's house, but swaths of houses in regions they (as an industry) deem risky.

I'm not sure what the answer is here other than forcing insurers to insure (which would raise premiums for everyone), or creating meta-insurance of some kind (insurance against becoming uninsured).

If a property is uninsurable, it can be bought for cash. The actual land value can still be mortgaged, too.

Would you want to hold collateral that has a high risk of becoming worthless? You would effectively be self insuring it and would have to price that into a loan you offered.

What I see happening in the future is builders will stop building homes in highly disaster prone areas because those places cant secure insurance and thus potential owners won't be able to secure a mortgage, and the only folks living there will be the very wealthy that can afford to self-insure.

There are some areas like CA where natural disaster risk can be mitigated through forest management and I think those places will continue to grow, but for places where we can't do anything to impact a natural disaster (ie hurricane's in florida), those places will start to have "off limit" zones for any type of insurable construction. These places will still be accessable, we will just build parks, beaches and other things there for the public, just not homes or commercial structures.

I think a big part of why natural disasters have gotten so bad is one climate change but also the fact that we're building places we shouldn't and in the future most will learn the lesson to no build in a certain area unless they are made of money and are aware of the risks of building their.

There's always some price at which an insurer would willingly insure. The only case where it is "impossible" is when there's a government price cap. The other issue that you implicitly refer to, though, is that the price of insurance can be altered annually, while the mortgage term is much longer. This mismatch creates "what happens when their collateral becomes [so expensive to insure that the homeowner would never have agreed to this mortgage deal on these terms upfront]?"

> Would you want to hold collateral that has a high risk of becoming worthless?

Of course not, the problem is that all parties were a-okay with the purchase in the first place, and the banks are trying to change the terms when they realize their hand is a losing one after many turns of the game. Sometimes that’s life, and the corporations should be forced to lose instead of changing the rules so the homeowner loses instead.

The rules are that you have to maintain casualty insurance in your property in order to keep the mortgage. If you don’t want to do that, the lender will try to obtain insurance on its own and bill you for it.

The bank is actually the loser here. Property becomes uninsurable, they still hold the collateral, and the borrower can simply walk away on a non-recourse state like California.