This has been a growing issue in the last year or so. The LA Time, Mercury News and SacBee have all been writing about it.
Basically it comes down to financial modeling. In broad brush, the insurers want to use recent fires and current costs of re-building in their actuarial models, but the State Insurance Commissioner will only allow the use of 20-year historical data. (fewer wild fires 20 years ago). Insurers also want to use rapidly increasing reinsurance rates in their modeling and the State says, No.
The issues in Florida are different, but same result as national insurers are pulling out.
CA Lawmakers are currently looking at teh sitch, but allowing higher rates for all is not a winning message (for pols).
The ratings are consistent with the area being colored red for high risk. Whether the map is accurate, and there is actually a high risk of wildfires and very high risk of earthquakes is a different matter.
Of course there can be a fire anywhere but certain portions of California are in forest fire and mudslide zones. That is why our entire county is high risk of fires. I was merely saying we are not in any of those zones. We are insured. We were insured in suburban Chicagoland, also not a fire or flood zone.
Yes, the Marshall fire in Superior (near Boulder - Dec 30, 2021) was horrific. It is not what would be considered high risk area, like other CO fires where developers built up into the hills, often without mitigation (removing trees near homes etc). It is open plains. We never imagined it was a fire that could cross a major highway. But there were extraordinary winds that day - over 70mph, gusts over 100mph. We happened to be in Boulder for lunch that day, and my husband came to my side of the car to help open/close the car door. On the way home, we saw a semi truck tipped over. Over 1000 homes were lost, but it is a credit to the emergency systems and workers that almost all human lives were saved.
We expect our home insurance in CO to go up again this year, by a lot. As retirees, it is gonna be a financial concern. I will try to remember the logical reasons , thinking on our friends who lost their home while away for the holidays, with the rebuild to be soon ready (after almost 2 years).
hmm… it says very high for Earthquake, which insurance doesn’t cover, not as high for fire. Insurance companies must be evaluating more than just this risk assessment.
And both things don’t impact just one home or a small neighborhood. If an Earthquake or Wildfire comes through it’s going to be many many homes and likely total losses. If an insurance company underwrote a good % of the properties in a specific area (particularly one with $M+ homes) it could - literally - bankrupt the company if something like that happened.
In Florida it’s the Hurricanes and coastal flooding. Same dynamic - when something happens it’s going to happen to thousands.
Their solution is to not offer policies or underwrite at what seem to be very high rates.
They may have their own risk assessments, and may weight different types of risk differently from FEMA (e.g. some types of weather disasters do not cause much damage that house insurance would pay for, but could be dangerous to the health or lives of those who live there, and earthquake and flood hazards are typically not covered by regular house insurance).
In addition, if an area has high building costs (even though they may not be as high as market values), that increases the risk exposure of insuring lots of houses in the area compared to insuring the same number of similar risk houses in an area with lower building costs.
I live in the Los Angeles area and have earthquake insurance through the California Earthquake Authority (CEA) that isn’t much more than our yearly home insurance. Together they are about $1500/yr for a house that cost about $500K twelve years ago. We had our house retrofitted about 5 years ago which gave us a discount on the earthquake insurance. Both policies are up for renewal in November so it will be interesting to see if the rates increase.
Understood - I wasn’t pointing at Earthquake specifically but I can see how that came across in the note. Was just saying that insurance companies want to avoid mass losses from single events.
This is why I think they’ll need to split our wildfire and hurricane coverage like they do for earthquake. These events will only increase moving forward.
This isn’t new. FL has had a government pool for homeowners for a long time. Many of the popular carriers pulled out of the state yrs ago. The state created a pooled service, funded by several insurance carriers and called it Citizens Insurance. For awhile (not sure anymore), it was all you could get in many counties.
We have separate policies for flood, hurricane and homeowners—hurricane WAS covered by homeowners until Iniki destroyed a lot on Kauai. Now we pay much more with less coverage.
We have earthquake insurance on our personal residence. We don’t have it on our business properties as it’s cost prohibitive.
My area is moderate for fire, high for earthquake. We haven’t had a problem getting homeowners insurance but the areas below the foothills not far have had many having to search hard for insurance due to fire risk.
Another issue we have seen in our business is insurers not wanting to insure older properties. There is another alternate to the fair plan. It’s carriers who are considered non-admitted.
