In the fall of 2018, the Camp Fire, the deadliest fire in California’s history, devastated a California community, leading to 85 deaths. According to USA Today, “the town of Paradise has lost over 90% of its population since the Camp Fire.” The fire burned it burned 153,000 acres and destroyed 14,000 residences. In an age when fires like this can obliterate communities, how are California’s insurers responding to the growing danger of huge fires?
A New Era of Fire Worries for Insurers
For insurers, a new era of fires means a new type of worry about fire. According to the Insurance Journal, “back-to-back severe wildfire seasons will make insurers even more cautious about writing in California’s higher risk areas, particularly around the wildland urban interface.” The challenge is that insurers don’t know exactly how new fire seasons are going to play out.
Insurers rely on history to determine fire risk. Historically, homes in California have been classified into higher and lower risk areas based on the local history of losses from fire. However, the past no longer defines what will happen in the future, and this is causing challenges for insurers.
The Cost for Insurers
As fire losses increase, the cost to insurers becomes astronomical. The Insurance Journal mentions that “direct losses incurred increased nearly four times in 2017, to $16.0 billion, compared to $4.2 billion in 2016.” As of April 2019, insured losses claimed for the 2018 fire season were over $12 billion and rising. This level of loss is not sustainable for insurers, who have expected fire seasons closer to 2016 levels, not the 2017-18 levels.
New Understandings of Fire Risk
In the future, instead of working with historical fire risks, computer simulations could be used to get a better understanding of the risk of fire in a specific area under a specific climate scenario. This would better inform insurers about the potential risk of fire in an area and give them a better idea of whether to insure in that area and how to insure.
Focusing on Resilient Communities
Will California homes become uninsurable? That is a real worry for some California homeowners. Non-renewals are increasing as insurance companies have become more concerned about the risk of insuring homes in areas that are very prone to fire, such as a wildland urban interface.
One of the benefits of these challenging conditions is that it opens the conversation about how to make homes safer in the future. There are discussions happening about how to make it safer for people living on the wildland urban interface and how to improve building codes, for example.
A focus on building more resilient, safer communities will not only benefit people trying to do and to keep their insurance jobs, it will also benefit the people who live in communities with fire risk, making it easier to prevent wildfires that start in the urban interface and making it easier to control damage from these fires.
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