Expanding Fire Threat Will Greatly Change CA Insurance Markets - And Whether People Can Buy Homes

EDIT

At the height of the infernos, state Insurance Commissioner Dave Jones warned the new year-round threat to homes in many parts of the state could change the entire fire insurance marketplace. This crisis is real, but it’s not yet widespread even though some homeowners have already gotten notices of non-renewal from insurance companies. Those are likely harbingers of many more to come.

Jones noted in an interview that insurance companies can’t cancel policies during their term. They must also renew policies for homes in fire disaster areas for at least one more year after any current policy expires. But they don’t have to renew policies in non-disaster areas when they expire, and they don’t have to renew homes in disaster areas more than one year beyond current policy expirations.

These rules mean there is a crisis, spurred largely by new weather conditions that have broadened areas rated as fire-prone. But this insurance availability crisis won’t look like what happened after the 1994 Northridge earthquake, when property insurance companies refused to renew many existing policies and stopped writing new home and business insurance in the state. That impasse ended in 1996 with creation of the California Earthquake Authority and elimination of an old rule under which companies writing any property insurance also had to offer quake coverage. The state-run CEA now writes the vast majority of earthquake policies.

EDIT

Overall, said Jones, “insurers are using more and more sophisticated (computer) models to determine risk factors. Some of those models might cause them to back off writing insurance in some areas.” All of which means climate change now is impacting wallets, forcing an insurance crisis in both proven and potential fire disaster areas.

EDIT/END

http://napavalleyregister.com/news/opinion/columnists/thomas_d_elias/thomas-d-elias-climate-change-behind-coming-fire-insurance-crisis/article_2efc4fe0-ebcd-5423-8d60-4a7b9bfd57e9.html