Number of the Day
Wildfires Are Breaking the Insurance Industry, by the Numbers
Insurers can’t afford to insure homes in wildfire-prone areas. California had to stop them from dropping homeowners.
$3.7 billion: That’s roughly how much insurance companies have paid out for fire damage each year between 2011 and 2018, up from an annual average of $400 million between 1991 and 2010, and less than $100 million between 1964 and 1990, according to a report in Bloomberg Businessweek about how insurers are struggling to model the risk of wildfires and keep premiums affordable in fire-heavy states like California.
Insuring property against wildfires is becoming increasingly unprofitable, and insurers may stop offering coverage in high-risk areas altogether. Earlier this month, California announced a one-year ban on insurers dropping coverage for homeowners in high-risk areas. Insurers wanting to drop homeowners in wildfire-prone areas is similar to what happened with flood insurance in the ’60s, leading to the creation of a federal government flood insurance program, which today covers more than 5 million homes and owes more than $20 billion in debt to the government — much of that debt stemming from 21st-century hurricanes like Katrina and Sandy.
