Professor Nancy Wallace's personal experience with the 1991 Oakland Hills fire ignited her mission to find solutions for California's burgeoning wildfire insurance crisis. She advocates for innovative insurance schemes and financial products to help homeowners fortify their homes against future fires.
Three decades ago, Nancy Wallace, professor of finance and real estate at UC Berkeley's Haas School of Business, narrowly escaped death in what was then California's most destructive wildfire. Since then, she's dedicated her work to finding solutions for California's looming housing insurance crisis, advocating for new insurance schemes and financial products that would help homeowners retrofit their homes and lower the danger of future wildfires.
For a time, California's insurance system seemed manageable. Big, destructive fires were less frequent, so the insurance system didn't experience as much stress. But, Wallace explains, around a decade ago, the frequency and severity of wildfires began to escalate dramatically. California regulations allowed for insurance premiums to remain artificially low. As massive fires demanded substantial payouts and the threat of widespread destruction loomed larger, insurance companies struggled to maintain profitability. Consequently, they started fleeing the state, leaving many homeowners vulnerable and facing exorbitant insurance costs or being denied coverage altogether.Despite the devastation, Wallace believes that homes will continue to be valuable investments in these fire-prone communities. In fact, economists have discovered that between 2001 and 2015, properties that were completely destroyed by fire and subsequently rebuilt gained significant value within a five-year period. This suggests that the market recognizes the resilience of these communities and the potential for long-term appreciation.Wallace's expertise in identifying and mitigating financial risks in housing markets has led her to develop innovative solutions for addressing the insurance crisis. She collaborates with climate scientists to create advanced forecast models that can better predict wildfire risk, providing valuable data for insurance companies to assess and price policies accurately. Wallace's personal experience with the 1991 Oakland Hills fire, where she narrowly escaped with her life, has fueled her passion for finding solutions. The fire, which consumed thousands of homes and left a devastating scar on the landscape, served as a stark reminder of the destructive power of wildfires and the urgent need for effective risk management strategies. Wallace's work goes beyond simply providing financial solutions; she aims to empower homeowners to make informed decisions about wildfire mitigation and create more resilient communities
WILDFIRES INSURANCE CALIFORNIA HOMEOWNERS RISK MANAGEMENT CLIMATE SCIENCE
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