Very few people in this country are unaware of the devastating wildfires that have hit the West and California in particular. Even though — technically — the wildfire season has lapsed, the Thomas Fire just North of Los Angeles continues to burn and Governor Jerry Brown predicts the state will be on fire from now on 365 days a year.
So far wildfires in California have cost insurers somewhere close to $12 billion. Moody’s analyst Adam Karmins thinks the Thomas Fire alone will cause $1.5 billion in losses.
In other words, losses in California are significant. Worry now is that insurers will give up on the state and stop selling homeowners insurance in the whole state or in specific areas.
While he’s not sure there will be a mass exodus, Ron Abram of Abram Interstate Insurance Services said insurers are reeling and wondering how to mitigate wildfire losses in the future.
“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,” Abram said.
He said other modeling exists from CoreLogic, RiskMeter and ISO’s FireLine Reports but it is not as in-depth as needed.
In an interview with Insurance Business, Abram said, “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. 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.”
Does that mean insurers will start packing and will no longer do business in California? “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,” Abram added.
Source link: Insurance Business America