wildfire insurance
The California Department of Insurance provides a number of useful consumer guides on residential property insurance on its website, including Ten Tips for Finding Residential Insurance and an informative series of Residential Insurance Guides.
The State Insurance Commissioner, the insurance industry and homeowners are all keenly aware of recent wildfire experiences in California. The insurance industry is constantly assessing its underwriting exposure in California and, in some cases, some insurance companies are refusing to renew existing policies or declining to underwrite new policies. The industry, consumers and other interests are also actively lobbying within Sacramento and other jurisdictions for legislative and administrative action to address various aspects of insurance coverage for fire loss in California. These initiatives include:
Wildfire Prevention, Safe Drinking Water, Drought Preparation, and Flood Protection Bond Act of 2020 (Allen S.B. 45): Upon approval by voters at the November 3, 2020 statewide general election, S.B. 45 would authorize the sale of $5.51 billion in general obligation bonds. Bond funds would be used for projects related to wildfire prevention, safe drinking water, drought preparation, and flood protection.
Disaster Mitigation Program (Rubio S.B. 292): S.B. 292 would create and fund a State-wide disaster mitigation program, overseen by a board of appointed State officials and members of the public to award grants to homeowners for specified fire-related disaster mitigation activities. To continuously fund the program, S.B. 292 would impose a $12 annual assessment on all residential property insurance policies, a $6 per vehicle annual assessment on all private passenger and commercial automobile insurance policies, and an annual assessment of 1% of the annual premium on all commercial insurance policies covering physical property damage or business interruption.
Home Hardening Property Tax Credit (McGuire S.B. 944): S.B. 944 would allow California personal income tax credits for each taxable year from January 1, 2021 until January 1, 2026, to a qualified taxpayer for qualified costs relating to qualified home hardening, and for qualified costs relating to qualified vegetation management in specified amounts.
Wildfire Safety Planning (Jackson S.B. 182): Current law requires local planning agencies to review and, if necessary, revise the safety element upon each revision of the housing element or local hazard mitigation plan, but not less than once every 8 years to identify new information relating to flood, fire hazards, climate adaptation and resiliency strategies. S.B. 182 would require the safety element, upon the next revision of the housing element or the hazard mitigation plan, to include a comprehensive retrofit strategy to reduce the risk of property loss and damage during wildfires.
Statewide Wildfire Risk Model (Friedman A.B. 3164): A.B. 3164 would amend Article 4200 of the Public Resources Code to require the Department of Forestry and Fire Protection to develop, by July 1, 2022, a wildland-urban interface wildfire risk model to determine both the severity of hazard and the risk present for a community or parcel within a local responsibility area or state responsibility area and guidelines for proper use of the model. The department would be required to establish and consult with an advisory workgroup to develop the model, and to update the model when fire hazard severity zones are revised.
Actuarial Assessment of Wildfire Risk (Rubio S.B. 1359): Existing law authorizes the Department of Insurance, headed by the Insurance Commissioner, to regulate insurers and insurance practices. Existing law requires insurers with written California premiums above a specified threshold to submit a report on its residential fire risk policies to the commissioner on or before April 1, 2020, and every 2 years thereafter. S.B. 1359 would require the commissioner, on or before March 1, 2021, to convene a stakeholder group to consider the actuarial soundness of residential property insurance rates, taking into consideration current wildfire risks to residential properties and communities, and to recommend changes to state law governing residential property insurance rates in communities that are located in high-risk wildfire areas before December 31, 2021 .
Insurance Renewal Notification (Rubio S.B. 755): Existing law prohibits an insurer from canceling or refusing to renew a policy of an insured that has suffered a loss, as specified, within certain time limits. Existing law also creates the Fair Access to Insurance Requirements or FAIR Plan Association to formulate and administer a program that equitably apportions among insurers, basic plans of insurance for property owners who, after diligent effort, are unable to procure such insurance through normal channels from an admitted insurer or a surplus line broker. Existing law requires a broker or agent to provide assistance, as specified, to a person seeking help in obtaining coverage. S.B. 755 would require specified insurers who fail to renew or offer renewal of a policy of residential property insurance to make certain notifications to a policyholder in writing regarding other options the policyholder may have, including information about the FAIR plan.
Fire Hazard Severity Zones (Burke AB 740): Under existing law, the California FAIR Plan Association is a joint reinsurance association formed by state insurers licensed to write basic property insurance in California to assist persons in securing basic property insurance and to formulate and administer a program for the equitable apportionment among insurers of basic property insurance. Existing law requires each insurer to participate in the writings, expenses, and profits and losses of the association in the proportion that its premiums written bear to the aggregate premiums written by all insurers in the program. Insurers who voluntarily write basic property insurance on risks located in areas designated as brush hazard areas are proportionately relieved of the liability to participate in the plan. AB 740 would add those insurers that voluntarily write basic property insurance on risks in high or very high fire hazard severity zones, as determined and mapped by the Department of Forestry and Fire Protection, to the insurers that are proportionately relieved of the liability to participate in the FAIR Plan.
Residential Property Insurance (Levine A.B. 3258): Existing law, as enacted by Proposition 103, prohibits specified insurance rates from being approved or remaining in effect that are excessive, inadequate, unfairly discriminatory, or otherwise in violation of the provisions of the act, and requires an insurer desiring to change an insurance rate to file a complete rate application with the Insurance Commissioner. The provisions of Proposition 103 may be amended by a statute enacted by a 2/3 vote of the Legislature. A.B. 3258 would require an insurer, in setting rates and issuing residential property insurance, to take into consideration measures implemented by local governments and communities to coordinate and bolster wildfire prevention and response programs.
The insurance industry is also exploring new underwriting practices, including the use of historical weather and geospatial data analysis to refine its assessment of risk for individual properties based on the local climatic, topographic and fuel factors surrounding an insured property, as well as the particular conditions of the specific property itself.