With October’s massive wine country wildfires as well as current monster blazes sweeping Southern California, This particular year will go down inside the record books among the most devastating fire seasons ever for insurance losses.
A spokesman for the state’s insurance regulator said Thursday of which year-to-date losses through the state’s fires already top $10 billion. However, a state ballot measure passed decades ago by California voters may save them through massive increases next year in property as well as casualty insurance rates.
Insurance claims for the October wildfires in Northern California alone currently top $9.4 billion, which includes destruction of or damage to more than 21,000 homes as well as 2,800 businesses, the California State Insurance Commissioner revealed Wednesday. As of Thursday evening, at least 439 structures have been destroyed so far inside the Thomas Fire in Ventura County, as well as of which’s before the catastrophic losses through various other blazes in Los Angeles as well as San Diego counties.
“These are extraordinary loss figures — $9.4 billion in October alone — as well as sadly as the fires rage in Southern California we can anticipate of which we will see significant losses there as well,” California Insurance Commissioner Dave Jones told reporters Wednesday.
the idea’s too early to say what the exact dollar amount of losses will be through the current Southern California wildfires since the fires are still raging, however S&P Global Ratings will be estimating the October fires alone caused more than $12 billion in losses. Some of the homes of which burned or were damaged inside the Bel Air fires This particular week in Los Angeles County include properties costing tens of millions of dollars, while further north the so-called Creek Fire damaged or destroyed at least 30 homes.
“We may experience increases in insurance costs inside the future as a result of the fires,” said Janet Ruiz, a California-based representative with the Insurance Information Institute.
Ruiz said insurance companies also can decide not to write completely new policies for homes in areas deemed high risk. She also said they manage risk in areas deemed larger fire risks “so they’ll spread the idea out. A company may feel like they have too much risk in a high-risk area, as well as they might not renew.”
There are also cases where completely new insurance companies come into high-risk areas because they might be able to get higher premiums. Either way, the existing as well as completely new insurers could need to get completely new rates approved by California’s Department of Insurance.
For those insurers of which spread risk to reinsurers, experts said, a lot of the impact will depend on whether or how much the reinsurers start rerating. Even before the October wildfires, there already were signs some reinsurers were looking to reduce exposure to the property catastrophe business due to the impacts of hurricanes.
Regardless, a voter measure passed decades ago will present a challenge for insurance companies looking to jack up rates right after the California wildfires.
Proposition 103, approved by California voters in 1988, requires the “prior approval” of the state’s insurance regulator before insurance companies can implement property as well as casualty rates, including homeowner’s insurance.
“California includes a consumer-friendly approach with Proposition 103, as well as the insurance industry hates the idea,” said Kenneth Klein, a California Western School of Law professor as well as expert on natural disasters.
Added Klein, “The insurance industry has been battling of which proposition for a long time.”
Under Proposition 103 as well as various other California insurance regulations, property as well as casualty insurance companies cannot take all the losses associated with one event, such as This particular year’s wildfires, as well as then simply put them onto next year’s rates. The state requires a longer-term trend, not a one- or two-year disaster impact.
“California will be a state of which you can say will be a little bit tougher to get rate increases versus various other states,” said S&P Global Ratings credit analyst Tracy Dolin.
“The insurers cannot take all of the losses associated that has a catastrophe like This particular [year’s wildfires] as well as dump the idea into next year’s rates,” said Jones, the insurance commissioner. “Instead, there’s a catastrophe factor inside the rate, which will be a trend of which looks back at catastrophes over the last 20 years.”
Jones said of which means losses This particular calendar year — whether through the wine country fires or the current wildfires in Southern California — “will be added into of which 20-year trend as well as will have some impact on rates.”
He estimated the catastrophes will have a “modest impact” however wouldn’t say how much he thought the idea could be.
“the idea will not be a dramatic impact,” he said.
Jones estimated of which his office has saved California consumers as well as businesses nearly $2.6 billion in premiums since 2011 by rejecting excessive rates or rate increases through insurers.
Without Proposition 103, Klein said, Californians could experience what happened inside the Gulf Coast inside the wake of 2005’s disastrous Hurricane Katrina. He said the industry was able to pass along big increases right after the disaster.
“After Katrina, the insurance industry immediately re-rated on the assumption of which a Katrina event could happen the next year, which of course the idea didn’t,” Klein said. “As a consequence, I believe of which was the single most-profitable year they ever had — the next year.”
Nonetheless, Klein said, California’s insurance regulators can’t ignore the increased wildfire risk in urban areas of the state as well as will need to work with the insurance companies.
“There’s no question of which insurance companies are going to have to react to what will be apparently a consequence of climate change, which will be the increase inside the frequency as well as severity of wildfires as well as wildfires in urban interfaces,” he said. The state’s insurance regulator “will be already having extended discussions about how they will make sure of which the insurance industry remains healthy as well as robust in This particular state.”