Impact of Wildfire on Property Insurance

Wildfires are happening more frequently and causing more damage. The losses caused by wildfire in 2017 alone exceeded California wildfire losses over the last 20 years combined. The October 2017 fires in Napa and Sonoma resulted in 23 fatalities, 245,000 acres burned and over 8,700 structures destroyed. In December 2017, 5 major fires hit Southern California resulting in 281,893 acres burned, 1,063 buildings lost and 2 fatalities. On January 8th the resulting scorched hillside in Santa Barbara gave way as torrential rains fell, destroying an additional 65 homes, damaging 462 and killing another 21 people. The November 2018 fires in Butte, Ventura and Los Angeles counties exceeded prior fires both in acres burned and loss of life. Total insured losses in 2018 due to wildfire in California were over $13 billion. During the November 2018 Woolsey & Hill fires in Los Angeles & Ventura counties, the fire burned 8,000 acres in 90 minutes. That's the equivalent of 30 football fields a minute.

A July 2019 report shows California experienced a five‐fold increase in burned area from 1972 to 2018. Risk Management Solutions, the world’s leading catastrophe risk modeling company, reports that “from a scientific perspective, these fires did not behave in unexpected ways given the conditions at the time of ignition: dry climate, low vegetation moisture and prolonged intense seasonal winds. The fires spread quickly after their ignition and accumulate burning embers. These embers were lofted into the air, causing long‐range spotting that enabled the fires to jump wide highways and cause damage far beyond the flaming fronts. During a period of particularly intense wind, the Butte fire spread at a rate of more than one football field per second.”

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One factor impacting these losses is that between 1990–2010 there has been a 40% increase in the amount of housing units built in Wildland Urban Interface.

The impact of wildfire on the homeowner’s insurance market is threefold—the cost to rebuild homes has increased due to the shortage of building material and contractors. Insurance companies are using updated risk models that better determine their concentration of homes in a particular area and each home’s wildfire exposure. Premiums are increasing for everyone in California, homes more susceptible to wildfire loss will see larger increases. 2 million homes are considered at high to extreme risk of wildfire damage. The largest number of homes at high risk are in L.A., San Diego, San Bernardino, Ventura and Alameda counties.

As a result of several years of unprecedented fires in the state, on December 5, 2019, regulators imposed a one-year moratorium banning insurers from dropping policies for homeowners in wildfire-prone areas. To see a list of ZIP codes covered by the mandatory moratorium, visit the insurance department’s website at insurance.ca.gov.

Things you can do to prepare for a wildfire include:

  • Build with fire in mind. This includes no wood decks, no wood roofs, and no wood siding.
  • Retrofit existing homes with 1/8" metal vents that prevent embers from being sucked into the attic or crawlspace.
  • Carefully plan landscaping to provide defensible space around your home. Replace wood bark with rock. Remove Italian cypress trees within 30' of your home.
  • Put together an evacuation plan—where you will go, how you get there and what you will take.
  • Review your insurance to make sure you have adequate protection.

Additional wildfire prevention tips can be found here.