wildfire risk in California and throughout the western United States is becoming uninsurable

2.7 million Californians living in very high wildfire hazard severity zones

insurance will be either increasingly [be] unaffordable, or unobtainable.”

In some specific areas Calfornia is seeing a “203% increase in non-renewals”

A terrific new wildfire project was undertaken by the Nature Conservancy and Willis Towers Watson about Wildfire, Wildfire Mitigate, Forests, and… Insurance is available. Much of this project is beyond the scope of a typical insurance read, but it is fascinating enough to post snippets of the report. We also encourage you to read the entire report by downloading it. The graphs and photos make actually pull it from the paper into your soul. We have a real wildfire insurance problem in this state leading to all sorts of claims and nonrenewals.

The Resilence Project funded in Part from the Forest Service:

The Resilience project was “funded in part through an Innovative Finance in National Forests Grant (IFNF) from the United States Endowment for Forestry and Communities, with funding from the United States Forest Service (USFS).”

The report states in certain and clear terms that “California is burning...” and that a “large number of homes and businesses built within or adjacent to forests or other lands at risk of wild‑fire.” To anyone living in Marin County or the Bay Area we certainly know this to be true. The metrics are based mostly in an area near Lake Tahoe within the state of California.

The entire report can be downloaded [for free] here. Because it is an adobe file it may be better for some to access it through the USDA site where they can find the link about halfway down on he page. The USDA link to the article is here.

Marindependent makes no representation of the accuracy of this report nor to are we able to review the scope of the science or such. We present exerpts of this in the interest of public safety and as it relates to the property insurance market. Thank you for reading.

Excerts from the Wildfire Resilence Project

Below are some important quotes from this article. All portions come direct from the website above.

“This problem is exacerbated by progressively longer fire seasons, affecting more and more people and having higherand higher direct and indirect economic costs.”

“[M]ore than 2.7 million Californians living in very high wildfire hazard severity zones, and the spike over the last few years in the number and severity of wildfires in California causing billions of dollars in damage, practices to reducewildfire hazard are paramount.”

Forests cover about 33 million acres in Californiaaboutone‑third of California’s land area – containing over 4 billion live trees. The largest share of forest lands is federal‑ly owned. Close to 60 percent (nearly 19 million acres) of forestlands in California are owned by the federal government, including the U.S. Forest Service (USFS), Bureau
of Land Management (BLM), and National Park Service. About one‑quarter (8 million acres) of forestland is in privatenon-industrial ownership.”

“The objective of the Wildfire Resilience Insurance project and study is to determine whether the wildfire risk reduction
associated with “ecological forestry”, applied at landscape scale can be accounted for in insurance modeling and structuring and to quantify the insurance benefits of ecological forestry including any reduction in expected losses
and consequential technical and actual premium savings.”

“Viewed through a risk management lens, wildfire risk in California and throughout the western United States is becoming uninsurable.

“In the case of insurance availability and pricing, for a given exposure (e.g., an office building in a location within the
Wildland-Urban Interface, WUI), the hazard is growing quickly, while the ability to increase the wildfire resilience of the building (i.e., reduce the level of damage endured for a given intensity of wildfire impact) is limited. If either the hazard becomes high enough, or vulnerability cannot be reduced sufficiently, insurance will be either increasingly
unaffordable, or unobtainable.”

“More ecological forestry at landscape scale – pro-actively managing natural vegetation including forests, as was natural up until the last century or so, using naturally ignited and intentional fire to improve forest health and reduce undergrowth and ladder fuels which in turn reduces the likelihood of severewildfires – is essential to reduce wildfire hazard.”

In this study, we assess whether and to what extent the severe wildfire risk reduction benefit of ecological forestry
can be accounted for in insurance modeling and structuring.

“With regard to residential indemnity insurance premium savings associated with ecological forestry, a representative residential portfolio composed of more than 80,000 properties distributed in the watershed and surrounding area and totaling an annual premium of over $51 million was analyzed, in addition to analyzing whether taking account of ecological forestry would lower premium costs for indemnity insurance for PCWA assets.

We found substantial savings in aggregate annual home insurance premiums of 41% or ~$21.1 million, assuming, for purposes of analysis, the application of ecological forestry at landscape scale such that it positively impacts, from a wildfire risk perspective, on the full North Fork American River sub-basin. Premium savings results of 52% for home insurance accounting for ecological forestry also were obtained when analyzing a single community of 533 homes inthe watershed.”

“Both private home insurers and the California FAIR Plan should incorporate the findings of this study in their rate development and modeling, so that where ecological forestry is occurring at landscape scale, rates for both the FAIR Plan and private home insurance will take into account the risk and expected loss reduction benefits of ecological forestry. This will help drive the scale and scope of de-risking activities that are required to maintain the availability of wildfire insurance across California. A next step would be to pilot a wildfire resilience insurance product with commercial or public property or asset owners or a community, where ecological forestry has or will occur at sufficient scale such that the risk of severe wildfire is reduced.”

Please do consider reading the entire report linked above as it as it absolutely has the potential to some day be considered in how insurance policies and premiums are derived. Keep in mind this quote from the report: “Viewed through a risk management lens, wildfire risk in California and throughout the western United States is becoming uninsurable.

“The number of wildfires in California causing billions of dollars in damage has spiked over the last few years, as has the cost of wildfire across the American West (e.g., Burke et al., 202016). While Southern California has seen an accumulation of such events since the early 2000s, the northern half of the state has only experienced a sharp rise in major loss events since 2013.”

“Wildfire-related insured global losses came to $15 billion in 2017 – a figure that was surpassed the following year
($18 billion). Especially severe fires caused billions of dollars in insured losses in Southern California in the years 2003, 2007, 2017 and 2018, while record losses in excess of $10 billion in 2017 and 2018 in Northern California are a strong indication that we have reached a new hazard level there as well. Previously, the only event in Northern California to exceed the billion-dollar insured loss threshold was the Tunnel Fire of 1991 with insured losses of $1.7 billion…”

“With over 1,300 insurance companies collecting over $310 billion in premiums annually and holding $5 trillion in assets under management, California is the US’s largest insurance market…”

“From an insurance perspective, the Camp Fire in Northern California in November 2018 was the world’s costliest
single event of that year, resulting in insured losses of $12 billion.”

“Due to the risk of wildfire in the Wildland Urban Interface (WUI) of California, home insurers are increasingly
declining to renew or write new insurance and are significantly increasing the price of insurance for those homes
that they continue to insure within the WUI. There are over four million Californian homes in the WUI, of which over a million face high to extreme risk of wildfire [citation 24].”

Between 2018 and 2019, there was a 31% increase in non-renewals of home insurance by insurance companies operating in California. According to the California Department of Insurance, most of the growth in non-renewals is occurring in areas with higher wildfire risk. In zip codes covering areas with moderate to very high wildfire risk, there was a 61% increase in non-renewals. In the ten counties with the highest exposure of homes to high or very high fire risk, there was a 203% increase in non-renewals [citation 26].”

Thank you to the Authors of this Important Wilfire Report:

A special thank you to the authors of this project and report as we all navigate what this insurance agent can only refer to as the hardest of insurance markets. Thanks Again!

Please speak with a licensed agent when making any insurance decisions.