Can you regulate your way out of an insurance quandary? They seem to believe that in California where the natural phenomenon of wildfires and landslides due to the San Andreas fault, offer a unique set of challenges for any home or Commercial insurer. Add on some creaking water infrastructure built around a century ago, rising lawlessness due to organised shoplifting, weak sentencing, plus a high cash limit on theft of goods and you have a recipe for all kinds of risks via empty retail and office properties in cities, as businesses fold, or pull out.
Empty buildings attract squatters, plus an increased risk of arson too.
So it’s no surprise that insurers have pulled out of California property. Both home and Commercial property asset values have rocketed in the last two decades, alongside the fire risks and the cutbacks in public sector services like building inspections, fire response services or forestry management. The question is can new legislation or regulation reverse the tide? IE thinks not, in fact in the end, the State itself will become the insurer of last resort for the wealthy, whilst the poor suffer huge, life-changing losses when fire, flood or criminal gangs sweep away their meagre homes and possessions inside.
Humans with a taste for arson are mainly responsible for the wildfire risks in California, new laws and long jail terms can deal with that – to an extent. But the asset values of the properties in the way of those fires aren’t going to suddenly drop to a few thousand dollars. In the end, someone has to pay to rebuild $300,000-$800,000 homes – why should it be insurers, and in turn their US policyholders who live OUTSIDE of California?
Here’s the press release below, for what it’s worth. New thinking – radical thinking – is required to resolve property risk coverage in California. Constantly blaming climate change is childish and weak-minded, because the problems run far deeper than any notional changes in weather patterns.
Insurance Commissioner Ricardo Lara today announced the final major step in his Sustainable Insurance Strategy, issuing a historic regulation aimed at restoring stability to California’s insurance market while addressing the growing risks of wildfires and climate change. The new Net Cost of Reinsurance in Ratemaking Regulation requires insurance companies — for the first time — to increase coverage in high-risk areas, ensuring more options for Californians while limiting the costs passed on to consumers. The regulation works hand-in-hand with other reforms that Commissioner Lara has spearheaded that will have the effect of increasing insurance coverage options for Californians across the state.
“Californians deserve a reliable insurance market that doesn’t retreat from communities most vulnerable to wildfires and climate change,” said Commissioner Lara. “This is a historic moment for California. My Sustainable Insurance Strategy is focused on addressing the challenges we f