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Triple-I Blog | Is California serious about the risk of forest fires?



Wildfire is a critical risk for California, but at least one insurance industry leader claims that the state government does not take it seriously enough.

"Yes, the governor has committed about $ 2 billion to budget items," writes John Norwood of Norwood Associates LLC in an Insurance Journal Op-Ed section. These include $ 404.8 million to hire staff and purchase firefighting equipment; $ 1

.128 billion for forestry, such as thinning and prescribed burns; and $ 616 million for community investment.

The details can be found in the fact sheet on forest fires and climate change from the governor's office.

"But," Op-Ed continues, "if you compare the dollar commitment to the list of other budget allocations that the governor has just signed, it seems that the administration and legislation decided that the wildfire problem was only worth as much as some of the lower ones. priority budget appropriations, such as cleaning up rubbish ($ 1.5 billion) and paying off overdue water and electricity bills ($ 2 billion).

Norwood is one of California's leading legislative advocates and managing partners of Norwood Associates. He is considered a leader in government insurance, financial services and the small business sector. , wiped out well over 10,000 homes, killed masses of residents and covered the state with unhealthy air.

"California homeowners and businesses pay five- and six-figure real estate insurance premiums, and that's only when they can find insurance at any cost," writes Norwood. "California's largest industries – agriculture and wine production – are being destroyed by the lack of available insurance."

And yet, he continues, "the $ 2 billion set aside for risks of forest fires does not make even the top five issues in the state based on the budget allocation for the fight. "

Reinsurance role

Reinsurance companies – which insure insurance companies – are crucial to how the world handles natural disasters. As the frequency and severity of small-scale disasters increase, they need to pay more attention. S&P Global states that "about half of the reinsurance companies we rate reduced their exposure in absolute terms, with very few players taking additional disaster risk."

It adds that this "risk-free trend" among reinsurance companies has been particularly visible in North America in recent years.

Without reinsurance, primary insurance interest rates must rise when properties in certain areas become uninsurable.

Norwood claims that the supply and price values ​​of real estate insurance are unlikely to change until the global reinsurance market believes that California is serious about addressing its forest fire risks and there are demonstrable results in reducing the number and severity of forest fires in the state.

Without the reinsurance market supporting California & # 39 ;s real estate / accident insurance companies, there will continue to be a state of the art property insurance crisis and prices for such coverage will continue to increase significantly to the detriment of California & # 39; homeowners and businesses.


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