February 6, 2020

What the Recent Wildfires Mean for Insurance

Written by:
Kelly Klee Staff
Reviewed by:

In the last two years alone, approximately 19 million acres of woodland have burned and alarmingly, these natural disasters show no sign of slowing down. Per analysis conducted by the Harvard School of Engineering and Applied Sciences, researchers have concluded that the number of wildfires in the West could rise by 50% come 2050, and could as much as double across the United States. Needless to say, it’s important to discuss how wildfires affect insurance policies and what you can do to best protect yourself and your assets.

In the United States, California has had the most frequent wildfires and has also incurred the most damage. The state of California also has the most property in wildfire-prone areas. It’s estimated that 2,019,800 properties are at high to extreme risk in California, with 717,800 in Texas, 371,000 in Colorado, and 237,000 in Arizona. That being said, even homes not immediately adjacent to these prone areas can be at risk due to powerful and often unpredictable winds.

Surprisingly, the number of acres burned by wildfires has not changed much over the last 20 years, but the severity and costliness of losses have skyrocketed. This is largely due to more people moving into high-risk areas, which in turn, alters the insurance landscape. Property insurance in California is experiencing a difficult market cycle due to the wildfire damages sustained over the last two years. Across the board, policyholders have higher premiums, insurers have stricter criteria, and there is reduced capacity with fewer insurers willing to write policies in high risk areas. Additionally, reinsurance (where insurers offload risk to other insurance companies) is particularly difficult to acquire in these areas.  Many homeowners policies are being non-renewed and replacement coverage is increasingly hard to secure.

Ultimately, the best thing to do if you live in a prone area, or relatively close to one, is to take precautions that can make your home less likely to burn. One of the best things you can do to avoid severe damage to your property is to reduce “fuel” around your home. Remove leaves and other natural debris from your gutters and around your lawn, move propane tanks used for grills away from your home and cars, and create at least 100 feet of defensible space around your home by removing flammable landscaping such as bamboo, bark mulch, and pine trees.

If a wildfire is threatening your property, we recommend that you shut off your home’s gas supply and air conditioning, close all doors and windows, and heed early evacuation and other orders from local officials.  If you’re insured by Chubb, PURE, or AIG and have wildfire defense coverage, stay in contact with your broker and insurer and follow their instructions.

Questions? Feel free to get in touch with us. We’d love to chat.

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