As wildfires continue to impact California, the state’s home insurance market faces challenges with rising claims and limited coverage options. Insurers have reduced their presence in high-risk areas, leaving homeowners with fewer choices and requiring alternative solutions. Recent actions, such as a mandatory moratorium on non-renewals and property tax relief measures, provide additional support for affected homeowners.
State Farm’s Withdrawals Amplify the Crisis
- In Pacific Palisades, State Farm has canceled 69% of its residential policies due to increased wildfire risks and escalating losses.
- Many homeowners have turned to the California Fair Access to Insurance Requirements (FAIR) Plan as a last-resort option for coverage.
The FAIR Plan Faces Overwhelming Pressure
- The FAIR Plan has estimated wildfire-related losses of $5.7 billion, while its current reinsurance coverage is $2.5 billion.
- A growing number of policyholders relying on the FAIR Plan may lead to adjustments in premiums or coverage options.
Mandatory Moratorium Offers Temporary Relief
California law provides a mandatory one-year moratorium on insurance companies canceling or non-renewing residential policies in certain areas following a declared state of emergency. The law, introduced through Senate Bill 824 (2018) and authored by Insurance Commissioner Ricardo Lara, aims to support policyholders during recovery.
- The Department of Insurance works with CAL-FIRE and the Governor’s Office of Emergency Services to identify ZIP codes within and adjacent to wildfire perimeters where the moratorium applies.
- The protection lasts for one year from the date of the Governor’s emergency declaration and applies to all residential policyholders within affected areas, regardless of whether they suffered a loss.
- Homeowners who suffer a total loss have additional protections under the law.
Commissioner Lara has implemented the moratorium following wildfires in recent years. Reviewing the Commissioner’s Bulletin for their area, homeowners can check if their ZIP code is included. If a cancellation or non-renewal notice has been issued despite the moratorium, homeowners can request reinstatement from their insurer or contact the Department of Insurance for assistance.
Property Tax Relief for Affected Homeowners
The Los Angeles County Assessor’s Office is monitoring the fires and assisting property owners whose properties have been damaged or destroyed. Property owners may qualify for temporary property tax relief through the Misfortune and Calamity Program.
- Damaged properties may be reassessed to reflect reduced value, potentially lowering property taxes until repairs or rebuilding are completed.
- Homeowners are encouraged to report property damage and apply for assistance after the fires are fully assessed.
Mitigation and Risk Management Efforts
Addressing the challenges related to California’s wildfire and home insurance landscape includes the following approaches:
- Policy intervention: Legislators may consider measures to balance wildfire risks and insurer sustainability, such as incentives to maintain coverage in high-risk areas.
- Wildfire mitigation: Community-level and homeowner-level fire prevention efforts can reduce risks and future losses.
- Innovation in insurance: Developing new insurance models or public-private partnerships may improve market stability.
Final Thoughts
California continues to implement measures like the mandatory moratorium and property tax relief to assist homeowners affected by wildfires. These efforts aim to provide resources and support during recovery while addressing ongoing challenges in the insurance landscape.
Photo courtesy: Mick Rhodes