The ongoing wildfires in California are expected to be one of the most costly disasters in the state's history, posing a significant threat to the insurance market and affordability of housing. The fires are likely to cause billions of dollars in damage, putting a strain on insurers and potentially leading to higher premiums for homeowners.
A home burns during the Palisades Fire on Wednesday. The area, which has suffered devastating property loss, was already considered high risk for insurers.The current fires are on track to become one of the most costly disasters in California history. That could threaten the stability of California's insurance market and make housing costs go up even more.It’s too early to assess the extent of the destruction, but the fires are likely to be one of the most damaging events in state history.
The state protects consumers from any changes to their insurance policy for one year following a disaster.Insurance Commissioner Ricardo Lara said in a statement that his department is committed to ensuring consumers “receive the services you contracted for with your insurance company,” adding that companies are pledging their commitment to the state.
“The FAIR Plan has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid,” the statement said. “The FAIR Plan remains vigilant in working with its customers in these challenging times.”State’s insurance regulators have been implementing a massive overhaul of insurance rules designed to ease the crisis in the insurance markets and to allow companies to charge what they think aligns with the risk exposure.
“Insurance companies in a catastrophe are like a bank during a bank run,” Wara said. “And as long as you have enough money in the vault to survive the bank run, you’re OK. But reinsurance means you can keep less money in your own vault because someone else’s vault is available to you.”
CALIFORNIA WILDFIRES INSURANCE MARKET HOUSING AFFORDABILITY FAIR PLAN REINSURANCE
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