“We still see this as a pretty healthy market,” said Janet Ruiz, the West Coast representative of the Insurance Information Institute, a national insurance industry trade group. Insurers typically comb through their portfolio on a periodic basis to insure they do not have too much risk in a certain locale, Ruiz said.
Insurers want to avoid what happened to Merced Property & Casualty, a small insurer that closed as a result of property claims filed after the November Camp fire, the costliest disaster in the world last year with $12.5 billion in insured losses. Merced had $64 million in claims and only $23 million in assets, and so was taken over by the state Department of Insurance.
The policyholders were protected, though, because Merced was covered under the California Insurance Guarantee Association, which will pay up to $500,000 per claim for carriers that become insolvent and our members of the organization.
Some insurers still see opportunity in the California insurance market, Ruiz said. She said that companies such as Delos Insurance Solutions and Spinnaker Insurance Co. of New Jersey have entered the market, which has attracted so-called surplus lines insurers that cover risks outside of standard underwriters.
Reinsurance companies, which provide insurance to insurance companies, have encouraged their clients to take more risk in wildfire areas, said Amy Bach, executive director of United Policyholders, a San Francisco-based consumer advocacy group.
Uncertainty for homeowners
Still, consumers, especially those living in high-risk areas, will see greater challenges to keep and find home insurance coverage. “I’m not super pessimistic,” Bach said. “But I’m worried.”
As more homeowners have their insurance policies dropped, state lawmakers’ interest undoubtedly will be piqued and they likely will try to intervene. State Sen. Bill Dodd, D-Napa, said he has heard anecdotally of homeowner policy cancellations, but is awaiting more data. housing costs, thousands leave county
“I take a very dim view of insurance companies being able to take risks in urban areas that don’t do it in rural areas,” said Dodd, who added that he will join the Senate insurance committee this legislative session to further explore the home insurance quandary.
The state Department of Insurance has the authority to request data from insurers on policies they cancel. Ricardo Lara, the new California insurance commissioner, intends to seek those numbers from carriers so his agency has a full picture of the effect of the wildfires in the past couple of years, his spokesman Michael Soller said.
While state lawmakers try to understand the severity of the home insurers scaling back their coverage risk in California, local homeowners are grappling with the fallout.
They include Jackie and Tom Lueder of Occidental who had been alerted by Liberty Mutual in 2017 their homeowner policy would be dropped, then were able to get a one-year reprieve.
“I just went into stress and panic,” Jackie Lueder said of the first cancellation letter, which came about a month after the 2017 North Bay fires.
After they received another similar notice a year later from Liberty Mutual, even though they never filed a claim in the 30 years they had the policy, they decided to look for another home insurer.
A local agent secured them with a homeowner policy through The Travelers Companies, which offered a more comprehensive coverage — but with a more expensive price tag.
“It was a pretty big jump,” Lueder said of the annual premium increase.