| | | Wildfire Damages will Fall on Insurance Customers – This is Not Cool (thinc.blog)
As the planet sends ever more ominous warnings, Serious journalists at Wall Street Journal ask the important questions“The canary in the Coal mine is almost dead.”
And I don’t feel so good myself.
Wall Street Journal:
A little-noticed rule change last year by California’s insurance regulator will likely shift a large chunk of the cost of the Los Angeles wildfires to homeowners across the state.
Pushed by insurers, the change puts California homeowners on the hook to pay directly toward the cost of rebuilding from very large disasters through even fatter insurance bills—whether they were exposed to the L.A. fire or not.
“That would be a huge wake-up call for Californians because they have no idea that the rules have changed,” said Dave Jones, a former California insurance commissioner.
The new policy affects the backstop for California’s Fair Plan, the state’s insurer of last resort, which sells fire-damage policies to homeowners who can’t get coverage elsewhere.
The worry is that the Fair Plan lacks the resources to pay for the quickly escalating cost of the fires, which have destroyed tens of thousands of structures.
The rules change means insurance companies can bill their customers if they are forced to bail out the plan, which has an estimated $200 million in cash and $2.5 billion in reinsurance, according to data it reported last year.
That is likely not enough to cover the Fair Plan’s share of the losses from the fires, forecast at up to $6 billion by analysts at Evercore ISI.
The Fair Plan’s business ballooned after private insurers pulled back from the state, gearing up for a disaster by not renewing policies as their risk models warned of likely conflagrations.
As the blazes spread, estimates of the financial toll keep rising. Analysts at Morningstar DBRS now forecast insured losses of up to $30 billion—the highest for any fire in the world in recent times.
Private insurers have sufficient reserves to cover the expected claims, and none are expected to be pushed into insolvency by the disaster, analysts said.
Los Angeles Times:
The historic devastation arrived after many insurance companies announced they were retreating from the Golden State, citing in part the increasing risk of devastating wildfires. Many homeowners in Pacific Palisades were dropped by providers in recent months and left with no option but to pay much higher premiums with minimal coverage under the state’s insurer of last resort.
For Dave Jones, director of UC Berkeley’s Climate Risk Initiative and the state’s former insurance commissioner, L.A. County fires tragically provide “more evidence that we are continuing to march towards an uninsurable future, because we’re not doing enough, fast enough to transition from fossil fuels and other greenhouse gas emitting industries.”
“I still believe insurance is the canary in the coal mine for the climate crisis,” he said. “And the canary is just about dead.”
New York Times:
As of last Friday, the FAIR Plan had just $377 million available to pay claims, according to the office of Senator Alex Padilla, Democrat of California. It’s not yet known how much in claims the plan will face but the total insured losses from the fires so far has been estimated at as much as $30 billion. Because the fires are still burning, that number could grow.
Unlike regular insurance companies, the FAIR Plan can’t refuse to cover homes just because they’re in vulnerable areas. As a result, as the risk of wildfires grows, homes deemed too dangerous by major insurers have been piling up on the FAIR Plan’s books.
Between 2020 and 2024, the number of homes covered by the plan more than doubled, to almost half a million properties with a value that tripled to about half a trillion dollars.
Homes in the Pacific Palisades have been increasingly covered by the FAIR Plan. Fire in the area has destroyed more than 1,000 homes so far, damaged 5,427, and threatens another 12,250, according to data released Tuesday by the Federal Emergency Management Agency.
Since the fires started last week, the FAIR Plan has refused to publicly disclose how much money it had on hand. A spokesman, Patrick Dorsey, would say only that the plan “is prepared for disaster.” |
|
