Fact Sheet
Wildfires and the Grid Fact Sheet
November 4, 2024
Fact Sheet
Wildfires and Insurance Fact Sheet
Overview
The increased frequency and intensity of wildfires is putting insurance at risk for homeowners and industries such as utilities. For utilities, wildfires can cause damage or destroy power lines, substations, and other critical infrastructure. Utilities are finding it incredibly difficult and expensive to obtain coverage along with existing insurance premiums skyrocketing. As wildfire risk increases, insurers are pulling out of high-risk states, leaving homeowners without coverage options.In places where insurers have stayed, homeowners are at risk of their premiums spiking as insurers struggle to cover increasing costs. In some cases, homeowners and utilities might be left to operate without insurance.
Key Points
Key Point 1
Financial implications of wildfires extend beyond direct damage to infrastructure, legal liabilities can run upwards to billions of dollars, further driving up insurance costs and affecting the financial stability of utility companies.
Key Point 2
Wildfires have diminished real estate values anywhere from $67.5 to $337.5 billion a year.
State Highlight: California FAIR Plan – Insurer of Last Resort
The California Fair Access to Insurance Requirements (FAIR) Plan was established in 1968 by the Governor and legislature to ensure that all homeowners can obtain basic home insurance coverage, regardless of their risk level. This plan became the state’s insurer of last resort for homeowners unable to obtain it from a traditional insurance carrier due to high wildfire risk. California’s FAIR Plan offers basic coverage through a shared market where licensed insurance companies agree to share the risk of California homeowners who do not qualify for voluntary coverage.
Policy Options
- California A.B. 1054 (enacted 2019): Takes steps to enforce utility safety standards, and assess when and how costs arising from utility-caused wildfires can be passed on to ratepayers. It also provides tools for utilities to manage liabilities, including options for debt management and a more substantial catastrophic wildfire fund.
- Hawaii S.R. 79 (enacted 2024): Resolution requesting the Insurance Commissioner to research and initiate discussions with stakeholders about establishing a Wildfire Insurance Compact to address the increasing wildfire risks exacerbated by climate change
- Oregon S.B.82 (enacted 2023): Mandated that insurers provide detailed notices to policyholders if a homeowner insurance policy is canceled, not renewed, or if premiums are increased due to wildfire risk. Prohibited the use of state-published wildfire risk maps as a basis for canceling, non-renewing, or increasing premiums on homeowner insurance policies.
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