Will the wildfires create an insurance desert on California’s north coast?

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A record breaking heatwave, an extended drought, and a post-vaccination summer full of crickets and fireworks mean one thing: wildfires are back and are expected to get worse than ever.

It is clear that this problem will not go away. As firefighters grapple with intense heat and extreme drought, homeowners and businesses are losing their insurance in an increasingly unsustainable risk environment. However, an insurance desert in one of the country’s largest markets does not have to be a matter of course.

Risk management is also possible in high-risk forest fire areas. As forest fires increase in severity and duration each year, companies that find ways to manage risk and insure residential and commercial real estate have a unique opportunity to gain access to a market in dire need of insurance.

In the Napa Valley, for example, fires threaten not only lives and property, but also the $ 5 billion wine industry and $ 2.2 billion in tourist spending.

Fires are an existential threat to the wine industry, especially vineyards that are losing their insurance. Last year, the Napa wine industry lost an estimated $ 2 billion when vineyards and inventory burned and smoke destroyed the delicate conditions necessary to produce a quality wine.

This year, one in four Sonoma County Farm Bureau members did not have to renew their insurance, and those who are eligible have tripled and quadrupled the cost for a fraction of the coverage.

The California FAIR Plan, a federally sponsored insurance pool designed to help diversify risk and provide insurance to farmers and wineries, was recently signed by Governor Gavin Newsom. While the new bill is a welcome step in the right direction, there are still concerns among some in the wine sector that it is still insufficient.

“We have some big, big problems and threats to the overall resilience of the Napa Valley wine business, and we must all come together to find those solutions,” said Michelle Novi, director of industrial relations and regulatory affairs for Napa Valley Vintners, in an interview with the Napa Valley Register.

Wineries aren’t the only ones facing a fire season without insurance. From 2015 to 2019, the insurers discontinued property insurance for over 143,000 customers.

Although California Insurance Commissioner Ricardo Lara has put in place a moratorium on non-renewal or cancellation of residential property policies for homes near or in areas that burned in the 2020 wildfires, that restriction is set to expire in November, the middle of this year’s fire season. Over 2 million policyholders could lose their insurance if they are at the highest risk of losing their home.

The risk of fire has increased dramatically in recent years, and trying to cobble together adequate coverage at an affordable price has become an almost impossible task.

On the flip side, California’s wine country, with a more manageable fire risk, could be extremely attractive to insurers, both because of its high property value and as a model for risk mitigation amid a changing climate.

Fires have become a problem for society as a whole – and reducing fire damage requires comprehensive solutions. In Napa, residents have proactively taken steps to protect homes and properties, clearing underbrush, setting up staging areas for first responders, and hiring private fire departments to reach the many remote areas across the valley.

As a communications infrastructure company based in Napa County, we use our expertise and experience to directly fight the fires that threaten our community. To really improve fire safety, early detection, better communication and faster response times are critical.

We partner with Napa County to deploy state-of-the-art fire detection technology that can detect fires in minutes. The fire alarm system in combination with the telecommunication infrastructure improves communication signals throughout the valley and alleviates communication failures in the event of fires.

The reality is that policyholders who take all measures and measures to protect their properties from fire are still too high a risk for many insurance companies. That’s because increasingly destructive forest fires are not a problem that anyone can solve on their own – but that doesn’t mean fires are not a solvable problem. To address this crisis, we need to invest in solutions that protect entire communities over the long term.

With natural disasters worsening, the insurance industry needs to take proactive steps to support comprehensive solutions.

Constantly falling insurance coverage and rising costs are not sustainable, especially if the risk only grows exponentially. Leveraging infrastructure that is easy to build and maintain, finding ways to make the best technology in the market affordable, and focusing on long-term approaches rather than short-term risk management could improve access to lucrative markets.

Insurers are not helpless at the risk of forest fires. Acting now could save countless lives and property, protect the local economy, and enable insurers to lead the industry towards a more sustainable model amid climate change.


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