Capital Corner
By Will Melofchik – NCOIL General Counsel
Welcome to the latest installment of Capital Corner, a column that aims to update you on some of the issues that NCOIL is following. Below are some of the issues that NCOIL will be discussing at the upcoming NCOIL Annual Meeting and will be monitoring throughout 2023.
Examining the Impact of Wildfire Risk on the Insurance Market
The reach and severity of wildfires in the U.S. has grown dramatically in the past several years. Some of the numbers surrounding that reality are truly staggering. By 2021, the five-year average of acres burned by wildfires roughly doubled from what it was in the early 1990s1. In 2021 alone, 58,985 wildfires burned 7,125,643 acres2. The insurance numbers associated with that increase in activity are equally staggering. Of the insured wildfire losses paid by the insurance industry since 1950, 70% have occurred since 20153. In 2017 and 2018 combined, home insurers’ underwriting losses in California reached an estimated $20 billion, more than double their profits from that line of business since the late 1990s4.
In light of those numbers, it is not surprising that policyholders have experienced some problems. While homeowners insurance pays for losses and damage to a property in the case of covered events, destruction and damage caused by wildfire is typically, but not always, included in homeowner insurance policies5. And, because of the increasing risk of wildfires, many homeowners living in communities at high-risk are facing steep increases in the cost of their homeowners insurance policies if they can find coverage that includes wildfire risks at all6.
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