Will the California wildfires result in a mass insurer exodus?

Will the California wildfires result in a mass insurer exodus? | Insurance Business America

Will the California wildfires result in a mass insurer exodus?
California remains stuck in the grips of one of the most devastating wildfire seasons in US history. Northern parts of the state are still reeling from the costly blazes in October and now insurers and other industry experts are forecasting an even gloomier picture for the fires still raging in the south.

The total cost of the fires will not be known for some weeks, but figures of around $12 billion have been forecast so far. The cost of the Thomas Fire alone (considered the most severe of the southern California wildfires) could be more than $1.5 billion, according to Moody’s Analytics senior analyst Adam Kamins.

As a state, California is no stranger to wildfires, but insurers and other industry experts are still struggling to provide effective mitigation.

“I think every insurance executive of every company that has business in California will be wondering how we can mitigate wildfire losses in the future,” said Ron Abram, president and CEO of Abram Interstate Insurance Services, based in Rocklin, CA.

“The problem is, there are very few predictive modelling systems like those we have for storm or hurricane exposures. At Abram Interstate, we have created our own internal software that compiles various types of data (fire history, tree mortality history, live information feeds from CAL FIRE) and we overlay that information when we look at our property exposures. But there’s no one repository for all of this information for all carriers or MGAs to gain some predictability for the future.”

There are some predictive modelling products available in the marketplace, including ones by CoreLogic, RiskMeter, and FireLine Reports, which is an ISO product. However, it is suggested these can’t offer the same in-depth analysis for wildfire as models can for windstorm.

“I imagine we will see pricing increases as a result of these wildfires and possibly territory realignments – where they re-designate pricing per territory to compensate areas that might be prone to wildfire,” Abram told Insurance Business. “We may also see a lack of availability in some cases where companies decide they can’t write in areas that have historically burned because they can’t get enough rate to do so.

“I don’t see a mass exodus from the state in any way, shape or form. But I do think carriers considering expanding into the state will be looking at it very carefully before they do so.”

As for Abram Interstate Insurance Services, they’re not going anywhere. The California “born and raised” company remains “absolutely committed” to the state, Abram confirmed.

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