Wildfire Insurance Alternatives

Photo credit: Mike Eliason, Santa Barbara County Fire

Throughout California and the western United States, we are experiencing intense wildfires at previously unthinkable scales and with unprecedented loss of homes and communities. Insurers are reassessing their risks and taking action to mitigate their exposure to wildfires, including significant rate increases, no longer providing home insurance, excluding wildfire losses from policies and other measures. Akin to earthquakes, it's likely that wildfire coverage will be carved out of core homeowner policies, and coverage for wildfire losses will come at a significant additional cost that many homeowners will not be able to afford. Although regulators have thus far prevented insurers from taking such drastic measures, the future is uncertain for the insurance marketplace. As a result, there is an urgent need to explore alternatives to traditional insurance models and experiment with other risk-sharing and risk reduction mechanisms that can serve county residents. Some options may be able to redirect premium costs to invest in reducing risk at various scales (from the home to the landscape) by implementing home hardening and other wildfire risk reduction measures like those described herein. The increasing costs of insurance may thus have a silver lining at the community scale. If insurance costs can be redirected into other mechanisms, they represent a significant potential revenue stream to fund wildfire risk reduction and resilience initiatives like those listed here. We recommend forming a collaborative working group that includes representatives from various jurisdictions, agencies, fire departments, insurers, real estate brokers and other highly interested parties to identify and assess alternatives, and prioritize the most promising for further development and begin investing.

Status: Conceptual

Cost: Medium

Partners:

Permitting: None

Funding Sources:

Additional Notes: This will require a thoughtfully facilitated process, significant research and analysis, and sophistication with financial tools, insurance and risk mitigation