About 350,000 residents have lost wildfire insurance in recent years, as a series of catastrophic fires have swept the state of California and insurance industry struggles to keep up with climate change.
Wildfire insurance is out of reach for many Californians, according to an article by Gireesh Shrimali, and the industry needs to adjust to the new climate realities of the state.
"Over the past several years, premiums have risen significantly – as much as 300% to 500% [pdf] in many cases. And in many high-risk areas, insurers are increasingly opting not to renew coverage," according to Shrimali. In all, 350,000 Californians have lost insurance coverage since a second year of catastrophic fires hit the state in 2018.
According to Shrimali, California needs a new way to calculate risk given the challenges of climate change in the state.
Challenges for insurers include the increasing severity of risk, the danger of adverse selection (when low-risk customers subsidize high-risk customers), and the effects of spiraling premiums.
To manage these risks, Shrimali suggests a few specific measures that would achieve better models for assessing and pricing risk as well as steps to ensure a "robust and guaranteed demand for wildfire insurance, which will attract private insurers into the market."
Read the full story: In fire-prone California, many residents can’t afford wildfire insurance
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