Insurance and Risk Management Ramifications of LA Fires

We’re watching scenes of the LA Fires unfold with horror, along with the rest of the country and world. We ache for the loss of life, property, and sense of security and are awe-struck by the efforts of the firefighters and first responders. They’ll be time for solution seeking later.

These types of extreme weather and climate events are escalating. Wildfire is unpredictable and relentless. All stakeholders must come together to provide a full solution. One thing for certain is that the insurance crisis can't be solved by continually raising rates.

The scope and magnitude are enormous. The significant losses will undoubtedly negatively impact the cost and availability of insurance coverage. Unfortunately, the LA Fires are occurring in places of high population density where climate, topography, and vegetative fuels promote fire spread. Plus, they’re being amplified by high winds. These factors only serve to exacerbate the insurance crisis.

There has been tremendous investment in understanding where risks are located and in fortifying response resources. The LA Fires demonstrate that this foundation is not enough. Equal focus should be placed on not having homes burn when these fires do occur. Structures and communities must be designed and built to withstand wind-driven embers, flames, and intense heat.

Building a sustainable insurance ecosystem requires moving beyond historical catastrophe models and traditional insurance underwriting and management practices.

We need:

• Science-based methods to precisely assess property-specific vulnerabilities and how to mitigate those risks to minimize causes of ignition
• Homeowner engagement to mitigate structure risks and remove vegetation that fuel wildfire spread
• Community-level collaboration because fire does not respect property boundaries
• Financial incentives for homeowners and communities to invest in mitigation and resilience, with cost offsets coming in the form of lower premiums for validated mitigation measures that prevent losses

The problem will not be solved until all stakeholders are aligned—from homeowners, insurers, reinsurers, and HOAs to legislators, regulators, government officials, and the banking community. Only then will we restore insurance rationality, safeguard real estate value, and protect homeowners and their assets.

California can take a national leadership role in modeling and implementing this type of collaboration. We hope it does.

FortressFire^® stands ready to support these efforts. Our commitment extends beyond fire science-based vulnerability analysis. It's a promise to build a community of informed and empowered property owners who prioritize the protection and insurability of their homes and businesses. It’s a promise to bring like-minded insurance carriers and reinsurers into the conversation who appreciate the nuance of combining physics-based analysis, mitigation and protection programs alongside traditional catastrophe modeling, underwriting, and risk pricing.

Reach out in the contact form below to let us know how we can help.