California has been recently struggling with what some are calling an “insurance crisis” where huge insurance providers like State Farm and Allstate refuse to renew policies amid rising liabilities and risk.
Now even California’s firefighters are struggling to get covered with fire insurance as the costs and risks of fires in the state continue to heat up.
Cal Fire Issue
On Thursday during a hearing, Governor Gavin Newsom’s administration defended a California Department of Forestry and Fire Protection (Cal Fire) decision to request $11 million to replace a kitchen at Ishi Conservation Camp.
The reason that the kitchen replacement request was so high is that the camp couldn’t secure adequate insurance. Insurance underwriters are increasingly unwilling to write policies to cover California’s increased risks for fire.
Ishi Camp
The Ishi Camp is located in Tehama County and is responsible for housing and training firefighters in the area. Cal Fire is typically in charge of issuing the bonds that Isha Camp needs to cover its property maintenance.
However, Ishi Camp is unable to find quality insurance, making the amount of money they needed rise astronomically.
Companies No Longer Interested
During the California Senate budget subcommittee hearing, Finance Department analyst Victor Lopez explained to lawmakers that the insurance industry is no longer interested in selling policies in this region in the Sierra Nevada foothills.
“The insurance industry, they weren’t interested in selling insurance policies in the region due to the perceived fire risk in the area,” Lopez said. Lopez also added that the state’s last resort, the FAIR Plan, doesn’t meet bond underwriters’ requirements either.
What is the FAIR Plan?
The California Fair Access to Insurance Requirements (FAIR) plan is a program established over 50 years ago that was created to ensure that state property owners, businesses, and insurance consumers have access to basic fire insurance protection.
It was implemented to help cover properties in high-risk areas that traditional insurance would not and now help California residents get coverage.
Fire Fighters Without Fire Insurance
In response to Lopez’s testimony before the Senate, both Republican and Democrat senators reacted with incredulity.
“We can’t get fire insurance at a fire station that’s going to be manned by firefighters,” said state Sen. Brian Dahle, a Republican from Lassen County, in the northeast corner of the state. “That’s where we are in California. That to me is crazy.”
Wildfires Out of Control
This year, Calmatters reported that the frequency of “megadroughts” and rising average temperatures attributed to climate change have been rapidly increasing the intensity of California’s wildfires.
Half of the state’s 20 largest fires on record have occurred in the past five years alone. Dry conditions on the ground make it easy for wildfires to form from lightning strikes or human-made causes like campfires or downed power lines.
Democratic Bill
Democrat state Senator Josh Becker brought up the bill he wrote that will require insurers to factor in steps property owners take to reduce their liability risk, like installing fire-resistant roofs. He noted the irony in the current situation.
“It’s ironic and highlights the problem we’re trying to solve,” Becker said about California’s fire insurance predicament. “We’re just trying to get recognition for the direct fire mitigation on the ground.”
Budget Drain
Cal Fire has been increasingly draining the budget the California government has to spend. This is problematic because the Legislative Analyst’s Office estimated in February a historic $73 billion shortfall in the 2024-2025 California budget.
Despite the drain on resources, lawmakers are hesitant to make cuts to Cal Fire as wildfire risks become increasingly common and Governor Newsom adds more firefighters to the rotation.
Insurance Crisis
It’s not just firefighters who are hard-pressed to get much-needed insurance coverage. Huge swaths of California property owners and insurance customers have been struggling to get coverage in recent months.
Steve Besbeck, a California resident, said his insurance company dropped him after 15 years. “I contacted nine insurance companies and none of them wanted to take us. None of them,” says Besbeck.
State Farm
In March, State Farm announced it would be pulling back from the California market by not renewing 72,000 policies in the state. In 2022, State Farm was California’s largest insurer and the policy nonrenewals come from California’s hottest areas with high fire risk.
“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said.
All State
All State, America’s largest insurance company, announced last year that it would be halting the sale of property and casualty insurance to any new customers in California.
The company said that it’s now too expensive to underwrite policies in the state, citing the myriad of natural disasters and increased risks.
