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Insured Losses from California's Carr and Mendocino Wildfires Reach $845 Million

by Precise Leads

September 28, 2018

The wildfires that swept through Northern California this summer destroyed some 8,800 homes — and the threat isn’t over yet.

The California Department of Insurance estimates that insured losses from this summer’s Northern California wildfires totaled $845 million, placing the blazes among the state’s most devastating fires. According to the agency, the Carr and Mendocino Complex fires either charred or leveled roughly 8,800 homes and 329 businesses. In addition, the wildfires scorched 800 cars, commercial vehicles, and other types of property. All told, more than 10,000 insurance claims were filed as the result of the infernos.

In terms of acreage, the Mendocino Complex wildfire was the largest in the state’s history, burning some 459,000 acres. The Carr blaze placed seventh after sweeping over 230,000 acres.

While the Carr and Mendocino Complex fires were still smoldering, California’s Insurance Commissioner Dave Jones declared a state of emergency and requested insurers speed up the claim filing process. Jones also asked insurers to forward policyholders 25% of the allowable limit for personal property damages and provide them with additional living expenses for up to four months.

Is the Worst Still to Come?

Jones pointed out that 17 of the state’s 20 most catastrophic wildfires have occurred after September 1. He added that experts predict “the worst fires for 2018 may still be ahead of us.”

If more fires do start this year, it would mark the second consecutive year the state has battled these increasingly destructive disasters. Last year, wildfires in Northern California caused $12.8 billion in insured losses.

“Over the past two decades, the frequency and severity of wildfires have increased and caused significant property damage in the wildland-urban interface areas of the state,” Jones said in a statement. “Even more troubling is that areas once considered not to be high risk are now being scorched by wildfires.”

In conjunction with the Carr and Mendocino Complex fire insured loss report, Jones’s department released a report on the intersection of climate change and wildfires. Insurance companies, Jones said, must take in account what he called the physical, transition, and liability risks posed by climate change in order to properly underwrite and fund their reserves.

How Will Insurers Respond?

The frequency of California wildfires has prompted some insurers to decline to write insurance policies in high-risk areas of the state and raise premiums. In response, Jones proposed insurers not deny coverage if, for example, a homeowner cleared brush from around their property to reduce the risk of a fire.

Insurance companies, he recommended, should first obtain approval for the risk models used to assess the possibility of a property catching fire. Homeowners should also be allowed to appeal an insurer’s judgment of their risk, Jones suggested.

Fortunately, there are options beyond private insurance for the state’s residents. California sponsors a program to provide policies to properties in high-risk areas through the nonprofit California Fair Access to Insurance Requirements (FAIR) Act, which covers any structural damages from fire and smoke.

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