Wildland Fires, Climate Change, Forest Practices and Insurance

Complicated issues don't have single solutions.

by Eric Holdeman / November 26, 2018

The recent fires in California have raised any number of issues associate with these fires:

  • Forestry practices
  • Climate change
  • Climate mitigation and adaptation
  • Who is at fault?
  • Where is fire insurance going in the future?

All of the above are covered in a To the Point podcast, you will need to look for the Nov. 14 recording at the link provided.

As Americans, we tend to focus on events happening in the contiguous 48 North American states. Wildfires are also occurring throughout the world. Greece and Portugal both had horrendous fires in 2018. Whether we like it or not, it is a global climate that we live in. What happens in the tropical rain forests of Brazil does matter to someone living in Northern California. 

Additionally, the fires may have been in California, but the smoke reached across North America all the way to the East Coast. 

I recommend the podcast to your listening. I would like to comment on one aspect that was addressed in that particular podcast that focused on property insurance. The part I'll comment on was not discussed that much in the segment.

Insurance companies are all about data. They can give you all the data on losses from different hazards, flood, hail, fire, wind, flooding, etc. They know their numbers and they track trends. I expect we will see a near-term revolution in how fire insurance and other natural hazard insurance is priced and is available. Just as we have seen in Florida with hurricane insurance and in California with earthquake insurance where companies withdrew from those markets, I can see a withdrawal coming from certain geographic regions and specific locations in the West, due to the fire risk.

While earthquake insurance isn't needed to get a home mortgage, you do need fire insurance. Perhaps what will help stop the housing creep into the wildland interface regions of the USA will be the inability to obtain fire insurance — for that mortgage. 

Insurance policies are only good for one year at the rate being offered. Thus insurance companies will have the opportunity to turn on a dime to adjust their rates to reflect the risks, or decline to cover certain properties that are "un-insurable" because of the high risk. 

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