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The Royal Commission into Natural Disaster Arrangements (Bushfire Royal Commission) opens its hearings next week. One of the issues that it will need to consider is whether the Australian system of home insurance is still fit for purpose in the face of increased climate-induced bushfire risk.

Major bushfires are now occurring with increased frequency. This means that houses will be more at risk than ever and Australia will have to decide whether the current purely market-based mechanism is the best means of protecting people’s homes. Having some mechanism of insuring homes is vital. If there is not an adequate and affordable insurance scheme many face the loss of their major asset, a steep decline in its value, or the prospect of not being able to rebuild their homes.

This is a huge and pervasive problem, given that up to one million homes might be uninsurable in the future because of climate-induced fire risk. It raises major questions about what kind of values ought to guide our response to the risk of new bushfires.