The increasing prevalence of wildfires in parts of California is causing insurers to re-consider covering homes and businesses.
This might mean that more homeowners could lose their insurance in the coming months, brokers and underwriters have told the Wall Street Journal.
Insurers are already reeling from massive payouts for wildfire losses in 2017 and 2018 – to the tune of more than $24 billion, according to the California Department of Insurance. And, according to reinsurance brokerage Guy Carpenter, wildfire losses in 2017 and 2018 exceeded any previous decade going back to at least 1970.
Timothy Gaspar, chief executive of Gaspar Insurance Services, said that certain areas in the state are basically “impossible” to cover.
“There’s a lot of areas that have gone from being difficult to insure to just basically impossible,” Gaspar told the WSJ. “It is something that’s going to continue to get worse.”
“It is already a very strained market,” Bill Fleischhacker, a reinsurance broker at Aon, told WSJ. “If there was another big event this year… it would be a major struggle.”
And it’s not just property losses. According to the WSJ, insurers and reinsurers could pay out wildfire-related claims for California utilities that have been found liable in starting fires – and that includes potentially facing claims from individuals and businesses following widespread blackouts.
“The only thing [insurers] know for sure is if they write less of this business, they’ll have less loss,” Nick Bellmont, a reinsurance broker for Holborn Corp, told WSJ. “That’s the only absolute that they know.”