Brush Hazards and Wildfire Woes

California has always battled wildfires, and they remain a source of risk for insurance carriers today. Accurate records of acreage, location, structures damaged, and deaths have been kept since 1932. These records now show a pattern of repeated ignition throughout California. Nevertheless, our population growth and new construction are occurring adjacent to brush. Monitoring and assessing brush risk is going to be an evolving concern.

Many factors contribute to these wildfires, including wind patterns, generally arid climate, and periodic droughts. These conditions lead to concentrations of dense, dry vegetation which can burn rapidly. With such a large land mass, California’s topography too often lends itself to conflagration. In response, agencies like CAL FIRE have helped coordinate first responders as well as provide real-time updates on wildfire conditions. In addition, CAL FIRE maintains building codes that correspond to the Fire Hazard Severity Zone maps (FHSZ).

So how do insurance companies deal with this problem? In past decades, entire swaths of land would simply be ineligible for coverage by many carriers. In more recent years, technology has allowed for much more sophisticated underwriting and rating- the proverbial “scalpel in place of the hatchet”. Tools like ISO’s FireLine, and RiskMeter have become widely used for determining eligibility for property insurance. These tools allow insurance companies to set thresholds for proximity to brush commensurate with their premiums.

In spite of these relatively new tools, carriers are still susceptible to large catastrophic losses in the millions. In recent years, this has resulted in price hikes for many property owners. Those less fortunate receive non-renewal notices and are forced to find replacement coverage. On the bright side, CA has a fairly robust specialty marketplace with both admitted, and non-admitted insurers. A broker with sufficient knowledge of that marketplace can usually find a solution notwithstanding the high price tag.

While the CA Fair Plan still serves as a backstop for those unable to obtain coverage, homeowners and investors alike have many options for property insurance. A word to the wise would be to contact an experienced insurance broker when considering the purchase of any CA property but, particularly when brush is a suspected risk factor. All too often the procurement of insurance is an afterthought and becomes a problem mid-transaction.
More information can be found in the below resources.

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