When I first read about California and State Farm wanting to get out of the market, it was couched as being about climate change and wildfire. Well, being a native Californian, I thought of downtown San Fran and LA, and Palm Desert and Barstow, and thought “huh, can’t be about wildfire.” I guess insurance companies want to use climate models to set rates.. I’d guess they’d prefer RCP 8.5 as well. I wouldn’t blame them. 1. Scientists tell us, 2. It’s good for business, 3. Let’s go with it!
Anyway, I thought this story was more holistic about the many factors involved, which not surprisingly, has to do with state regulation. The story is from E&E news and isn’t paywalled.
For property insurers, Prop 103 has made it almost impossible to set premiums based on computer models that project future risks including climate impacts, said Mark Sektnan, vice president for state government relations at the American Property Casualty Insurance Association. That’s because Prop 103 requires modeling used by insurers to be made public, which modeling companies want to avoid, Sektnan said.
Instead, insurers are setting rates based on their losses over the preceding 20 years.
“It’s a little bit like driving your car using the rearview mirror when your windshield is right there in front of you,” Sektnan said.
When insurers analyze the past 20 years to set rates, they are not fully capturing recent increases in California’s wildfire risk as climate-driven hotter temperatures have made the state’s forests and grasslands drier and more combustible, experts say.
For example, in the 20 years from 2003 through 2022, wildfires burned an average of 1 million acres a year in California, according to an E&E News analysis of data from the state Department of Forestry and Fire Protection.
But in the six years from 2017 through 2022, California wildfires burned an average of 1.8 million acres a year and destroyed or damaged nearly 51,000 structures in total.
“The problem in California is that the risk is changing pretty quickly, especially if you think over two decades. Two decades is just not fit for the problem,” Wara said.
Nancy Watkins, a California-based principal at Milliman insurance consultants, said the retrospective method “is an extremely simple rate-making model that in practice has totally failed to anticipate the growing risk in California due to factors like housing growth in high-risk areas, vegetation build up, the effect of climate change on longer fire seasons, hotter temperatures, drier air.”
“None of that is factored into a backward-looking formula,” Watkins added.
I don’t know what “making modeling public” entails versus having insurance regulators review the models, but it seems like an area that could lead to a potential lack of trust.
public disclosure of complex models is often an issue for competitive businesses. It introduces multiple risks that are rarely offset by any value to the disclosing entity. The public often lacks an understanding of how complex models work. The media will often compare and contrast models across companies, nit-picking trends and highlighting problems. And the competition will get access to the models, giving them a competitive advantage. Lots of risks, and few (if any) benefits…
I understand that.. I guess then it would depend on review of the models by insurance regulators. Do they do that? do they have people qualified to do that? Are those people identified? Do they issue a report (without the details)? It seems to me that lack of transparency can lead to lack of trust by the public , both with the agency and with regulators. Which seems like it’s also a risk.
This situation doesn’t really require pulling back the curtain on insurance company’s actuarial process. What’s more the claim that California insurance regulators don’t allow climate change to be calculated into premiums is a bit of red herring…
The real issue is that the losses have been so massive in California that they have had to directly prevent home insurers from leaving the state despite and it was just a matter of time before insurers would finally find a way out.
The business of home insurance is no longer functional when you have events like the Tubbs fire burning down 5% of all housing in the city of Santa Rosa. Then soon after the Paradise fire burning down close to 15% of all houses in Butte county.
All told we’re looking at 100K houses lost to wildfire in California in the past couple-few decades and for-profit home insurance companies have no interest in providing that type of coverage no matter how few limits there are on their rates being doubled and tripled.
And this is just the early days of climate change… For years now California has been looking at how to insure homes in their state that insurance companies are no longer going to insure. It’s just the nature of the beast when climate conditions shift a for-profit insurance portfolio into the highest of high risk categories.
Meanwhile on the ground, the collaboration between insurance companies who want to defend houses with their own fire crews and coordination with wildlands firefighters is suffering from a huge lack of leadership.
And would you really want to sell insurance in a state with antiquated mandatory evacuations during a fire that means a single ember that lands on a house can’t quickly be put out because “it’s not safe” to be in an evacuated area? Almost all these houses that burned to the ground could easily be prevented if we had insurance company firefighters working in coordination with other firefighting agencies:
“The reality is that most homes do not ignite from direct contact with a flame front. In fact, it’s estimated that 90% of homes are destroyed indirectly by wind-borne embers that are carried ahead of the fire perimeter.” https://www.frontlinewildfire.com/wildfire-news-and-resources/wildfire-embers-how-homes-catch-on-fire/
Meanwhile in places like Boony Doon, California and Brightenbush Hot Springs, Oregon people with lots of equipment and firefighting experience defied evacuation orders and risked their lives to successfully save their homes and their home’s structures from destruction. We need more of this and its going to require lots of specialized equipment that doesn’t yet exist and yes, lives will be lost in the process.
As in we’re gonna need to re-think how we’re gonna protect houses in wildfires… As in we’ve long had bomb shelters, tornado shelters, and hurricane shelters and it’s about time that we need to have wildfire shelters for local firefighters as well as hardened water supply infrastructure so firefighters can quickly put out the flames on houses before and after the main front of the fire has moves through rather than letting whole houses burn to the ground while everyone keeps clicking refresh for internet updates outside the evacuation zone for days or weeks until it “safe” to go back in…
What’s more we also need rapidly deployable foil fabric tent structures for houses, as well as sprinklers on top of that… All these solutions to living with wildfire are inevitable. The first step of course is the insurance companies saying, sorry, we won’t insure your home anymore if we don’t have better ways to work together to protect what we’re insuring.
And I think we posted this before about Calif vs. Colorado. https://www.ocregister.com/2020/11/13/california-can-learn-from-colorado-on-protecting-homes-from-wildfire-risks/
Ahh “climate change”, that good old slippery, squishy blob of uncertainty that has become the “go to” cause of all things with dastardly intent. Is the climate changing? Yes. Is it something we cannot fathom how to address? Um, no…. In 1969, we put a man on the moon and returned him (two of em) safely back home! 1969!
Insurance companies have given their policy holders a choice; Fire harden your stuff or we are pulling out (see Colorado Front Range – Conifer, Bailey, Evergreen, etc.). I used to live in Evergreen, and my first act of yard work was to cut anything that wasn’t a pine tree down and get rid of the slash. Having experienced Wallow Fire in Arizona, and being Advanced Agency Administrator on more than I can remember on catastrophic fires, I understand what it takes to try and save homes.
Back in the 1980’s and 1990’s, I grew chickens – lots of chickens; a million pounds of chickens per year. As such, our open chicken houses (computer controlled) did not fare well to heavy ice and snow accumulations. When a 16,000 square foot chicken house falls, someone will hear it. Insurance companies began to flee policy holders to keep from paying out $400,000 worth of crinkled metal and dead bird claims. Climate change? Nope, poor engineering and construction practices. I never had a claim, by the way.
I don’t agree with accepting loss of life as a learning journey, but certainly better coordination with fire suppression services and a bit less arrogance of Agency personnel could/would go a long way…..
Told you so.
County commissions are infamous for rubber-stamping new homebuilding in the wildland-urban interface and like most Republicans they are among the first blaming environmentalists for bringing science-based decision-making to forest policy.
Utilities, insurers, county commissions, lenders and developers need to be held accountable for building tinder boxes packed so closely together that homeowners can see into each others bathrooms. Counties should be able to fine property owners who fail to create defensible space or clear dry fuels. Well-funded local and volunteer fire departments could conduct prescribed fires and burn road ditches to create buffers where contract fire specialists don’t exist. But even government can’t always protect you from your own stupidity.
On the bright side all those houses far, far away from town are effectively off the market and no longer a viable investment once they can no longer be insured. And when when they do eventually burn down the financing to replace the home will probably be even harder to get than the permits that a more sober county might not be willing to issue.
As in this might be a perfect storm when it comes to large scale land acquisition that expands parkland and reduces private land. Sure would be cool for future generations a century from now to visit national parks that we never heard of that were built from the remaining infrastructure of rural-urban neighborhoods that could no longer be insured and thus had to end…
Wow, that’s kind of dystopian, Deane! I guess you don’t live in one of those neighborhoods that “had to end”- also, in my part of the country, that’s where we build affordable housing because everything is basically WUI. In fact, downtown Boulder is a wildfire risk from the First Street Forum risk maps…
Best thing I can say is “Bless her heart”….🤣
Dyspeptic was better.
A dystopia is the inevitable end game of all civilizations. Nothing lasts forever, especially when people fail to adapt and change by directly addressing obvious threats to what they’ve created.
Remember the dust bowl/unsustainable agriculture combined with the depression that led to 750,000 family farms disappearing through foreclosure or bankruptcy in the first half of the 1930’s?
“By 1934, an estimated 35 million acres of formerly cultivated land had been rendered useless for farming, while another 125 million acres—an area roughly three-quarters the size of Texas—was rapidly losing its topsoil.” https://www.history.com/topics/great-depression/dust-bowl
Of course this loss of home insurance dystopias will likely happen in Florida and Louisiana more often and sooner than in areas with high wildfire risk…
As documented in a recent NY Times article we’re on the precipice of severe weather making large areas of suburbia unable to get insurance and maybe existing homeowners can hang in there, but those homes will be worth pennies on the dollar once both the state and private insurance schemes no longer exits.
As in the primary value of a home and the market in general is because there is certainty that the value is long term stable appreciation of value. But without insurance that value vanishes in either the next storm, or the next time the ownership changes:
“In parts of eastern Kentucky ravaged by storms last summer, the price of flood insurance is set to quadruple. In Louisiana, the top insurance official says the market is in crisis, and is offering millions of dollars in subsidies to try to draw insurers to the state. And in much of Florida, homeowners are increasingly struggling to buy storm coverage. Most big insurers have pulled out of the state already, sending homeowners to smaller private companies that are straining to stay in business — a possible glimpse into California’s future if more big insurers leave.” https://www.nytimes.com/2023/05/31/climate/climate-change-insurance-wildfires-california.html
Hmm. The NY Times.. monger of fear. I don’t remember the 30’s but my relatives lived through the Dust Bowl. As I went to visit my aunt in Dust Bowl country, I see now thriving wheat, milo, grazing, wind turbines and oil and gas rigs. So adaptation has indeed occurred.
Yes, insurance companies want to make more money.. so the beat goes on. Surprising? People used to be skeptical of corporations’ claims.. now only disfavored corporations.
As to Florida, check this out https://rogerpielkejr.substack.com/p/2023-update-what-the-media-wont-tell
Thanks for a rebuttal that perfectly engenders what my previous comment referred to as “Nothing lasts forever, especially when people fail to adapt and change by directly addressing obvious threats to what they’ve created.”
A very similar situation in our nation’s history that guides us as to what will happen with climate change is the mass migration due to the dust bowl. The states most impacted emptied out during the dust bowl and those people and that lost topsoil never came back and your cheery anecdotal evidence is dishonest by every measure.
Of course before your deceptive story, you first shoot the messenger and dismiss a credible journalist of the NYtimes as someone who’s just mongering fear…
Here’s some basic referenced facts of which your absurdly dismissive rebuttal has none of:
“By 1940, 2.5 million people had moved out of the Plains states…” https://www.pbs.org/wgbh/americanexperience/features/surviving-the-dust-bowl-mass-exodus-plains
“Since farmers began tilling the land in the Midwest 160 years ago, 57.6 billion metric tons of topsoil have eroded, according to a study published recently in Earth’s Future. The loss has occurred despite conservation efforts implemented in the 1930s after the Dust Bowl, and the erosion rate is estimated to be double what the U.S. Department of Agriculture (USDA) says is sustainable. Future crop production could be severely limited if it continues, reports Rachel Crowell for Science News.” https://www.smithsonianmag.com/smart-news/57-billion-tons-of-top-soil-have-eroded-in-the-midwest-in-the-last-160-years-180979936/
So when all of western WA and OR are priced out by tech and progress, and the only affordable housing is on the east slopes and taken up by the workers involved in the sustainable ag industry on that side of the hill, will we refer to Olympia, Seattle, Bellingham, and Vancouver the same way as you refer to the dust bowl above?
The smartest around have said, and always said, and continue to say, that the Insurance industry will fix what is not working in California. I know you don’t like it, but economics drive everything in the US. Capitalism.
That is why the biggest timber companies have more or less pivoted, gone away, diversified, or gotten smarter in their operations.
Likely, we will see Insurance companies reward home hardening AND vegetation treatment, both on an individual’s property and outside of it (easy access to rapid high res imagery).
Otherwise, prepare for the same thing that happened to ag, timber, weed, and housing in a small way – massive corporations consolidating ownership, and the power placed in the hands of a few (and money). Think all your rentals now owned by the same 4-5 corps. Tracking with very few insurance companies willing to underwrite homes in CA and elsewhere, and government money propping it up.
We’re talking California, Larry. It’s hard to imagine that all the county commissioners are R’s.
I’m not saying these news stories are wrong. I’m just saying I live in Colorado in the WUI and insurance is not even a topic (tax assessments, now that’s a topic!).
In this part of Santa Fe County I am the fire department for a community of about twenty five properties spread over some sixteen square miles of tansy mustard, juniper and cured grasses committed to respond with a 210 gallon tank mounted on a tractor-pulled trailer pumping water with a gasoline-powered pump.
I think there’s grant $ to support local fire departments in the BIL and IRA somewhere.
Hi Sharon, thanks for making sure you were able to take away the reply function for anyone who wants to reply to so called ANON’s comments…
Funny part is you didn’t secure your website well enough to truly hide the real identity of this person. A truly pathetic and classic example of what’s wrong with the both the intellectual and moral compass of this website.
When you ensure that anonymous cowards have more rights and privileges than actual real life people that comment with their real name you ensure that logic and fairness, as well as valid scientific references are inferior to the expressions of hatred and anti-social behaviors from people who are too scared to be known by their real names.
So happy how my ongoing research of this website is benefiting so many lawyers who are focusing on outing this type of systemic corruption in public lands management! Gonna be so fun when all the class action legal briefs finally get filed with all the many Smokey Wire comments I’ve compiled!
Umm… Deane. I didn’t take away the reply function. It runs out after awhile because people complained that there were too many layers. I have found myself unable to reply also.
I really don’t understand what you’re saying about not hiding the identity and the moral compass. You’re acting kind of troll-ish and not helpful.
Despite making my reasons for being Anon clear in other posts, and trying really hard to argue in good faith, this is clearly not ok.
Deane is making obvious threats, personal attacks, and making up things that don’t exist on Smokey Wire.
I can’t stress enough – this is a person who is making threats. Who makes other posters uncomfortable through their words written here. Who has a recorded history of aggressive agenda driven personal attacks here and elsewhere, and does not respect other opinions.
Deane may make valid points in between his invective language, but it is lost in context, and all that is left is a human who is scary and antithetical to the spirit of Smokey Wire.
I agree. Threatening is crossing a line. My web folks say that the threats are without foundation, but that’s not really the point.
Actually, it is WordPress that limits replies in longer threads. Us moderators can reply when it becomes unavailable to the public. If the reply function becomes unavailable, you are always welcome to continue the conversation in a new comment thread. We’ll understand.
Deane, thanks for making the best argument in favor of allowing anonymous comments. Judging by this comment and others you have made, if I were to put my name on the end of this particular comment, you’d have my entire life story plastered across the internet before I closed my web browser. I’d definitely think twice about leaving my doors unlocked after something like that, let alone worry about my career. The lengths you’ve shown you’re willing to “out” someone is amazing, and concerning.
The 2012 Waldo Canyon Fire was Colorado’s costliest at nearly half a billion dollars until the Black Forest Fire the next year surpassed that. In October, 2020 the East Troublesome Fire incinerated nearly 200,000 acres of mixed timber and grass becoming the second largest wildfire ever recorded in Colorado.
It was believed early that downed power lines caused the Marshall Fire in Boulder County, today the state’s most destructive blaze, and claims for damage are north of two billion dollars. That firestorm a year ago forced the evacuation of tens of thousands and evaporated over a thousand homes but Xcel Energy insists it isn’t at fault. And while the cause still hasn’t been determined the Boulder County Sheriff has still not ruled out a smoldering coal seam or even weaponized wildfire.
Allstate will no longer cover new policies in California.
https://www.cbsnews.com/news/allstate-insurance-state-farm-california/
“American International Group Inc., which has already pulled back from new California business, is now set to curb home-insurance sales for affluent customers in around 200 ZIP codes across the U.S., including New York, Delaware, Florida, Colorado, Montana, Idaho and Wyoming.
But the AIG move stands out, both because of the broadness of its reach — touching states that are not normally considered in the high-risk pool — and what that breadth says about the years to come. A warming world means rising waters, stronger storms, more wildfires and more places experiencing extreme weather and natural disasters. Anyone in a high-risk area, whether the woods of New Jersey or the floodplains of Illinois, could see their access to insurance affected.”
https://helenair.com/ap/lifestyles/climate-change-homeowners-insurance-on-a-collision-course/article_02de37a9-a3db-5511-bf2b-807cbad2ce01.html?utm_source=ground.news&utm_medium=referral
Thanks, Jon, this is interesting. I wonder how they can pull it only for affluent customers and not for everyone…? I read the article and it didn’t say.
I thought that part was weird, too. Maybe those are generally affluent zip codes. (Maybe they are looking at a insuring up to some amount? Leaving more expensive homes more exposed?)