At the beginning of the wildfire season, California insurance regulators Drastic change To discourage housing construction in fire-prone areas, consider separating new construction in those areas from the only source of insurance, which is the state’s high-risk pool.
Many of the proposals require state legislature approval, but the latest indications that climate change is beginning to disrupt parts of the U.S. economy as it may rebuild some real estate markets in California. It’s a sign.
On Friday, insurance commissioner Ricardo Lara proposed suspending state funding for infrastructure in certain fire-prone areas, leaving vacant lots undeveloped and expanding stricter building codes. Approved.
“These ideas will be challenging,” Lara said at the beginning of the Climate Insurance Working Group’s meeting. “We are really stepping into an unknown territory.”
The construction industry immediately opposed the recommendation. Dan Dunmoyer, chairman of the California Building Industry Association, said building codes are already strong enough to protect homes in high-risk areas, so there is no need to limit development.
“If you meet the minimum code requirements, you’re building a fire-fighting home,” says Dan Moyer. He added that if the state wants to make insurance available in these areas, it should allow insurers to raise their premiums.
The new proposal presents the latest chapter in California’s struggle to deal with record-breaking wildfires that began in 2017. These fires were unmatched in the number and scale of insurance claims from homeowners, resulting in enormous damage to insurers and wiped out. Profit for decades.
In response to this, insurance companies Withdrawal from fire-prone areas, Threatening the ability of people to buy and sell homes that rely on access to affordable insurance. This is because banks usually require insurance as a condition for issuing a mortgage.
The country has taken a series of increasingly aggressive steps Stepincluding Temporarily ban companies From losing some customers after a wildfire. However, these measures were taken as state officials were looking for more permanent changes to enable the insurance industry to continue operating in high-risk areas. Was intended to be a temporary pause.
California’s experience could be a model for other parts of the United States that have been staggered by a series of catastrophic damage. Forest fire, Hurricanes, floods and other disasters.
In addition to human suffering, these disasters are increasing pressure on the financial sector, with large investors saying “Whole body threatTo the economy. President Biden told federal authorities last month Prepare for financial shock From climate change, including the turmoil in the insurance market.
The proposal approved by Lara provides a window for understanding the magnitude of the changes that may be needed to prepare for these shocks.
The recommendations include changes to the insurance industry itself. For example, insurers are more likely to claim higher premiums based on the losses they will incur due to future disasters. Currently, they can only request higher rate requests based on past losses.
However, other proposed changes reflect growing consensus among experts that the acceleration of climate risk is rapidly becoming uninsured. The government wants to keep insurance affordable. If so, it means finding new ways to limit people’s exposure to that risk.
In California, like most other states, local officials have a great deal of control over where they build their homes.Those officials are facing Strong incentives Allow construction in fire-prone areas: New homes mean more jobs and more housing, leading to more tax revenues.
However, expanding development to fire-prone areas also comes with costs such as fighting wildfires, evacuating people, and repairing after damage. A significant portion of these costs are borne by the state and insurance companies. Insurers have little influence on the decision to build there in the first place.
The recommendations call on the state to put pressure on local authorities to be more cautious about where new homes can be built, even if that means discontinuing state support. According to the Working Group. The state needs to determine areas where climate risk is “too high to use state funds to support new developments and infrastructure.”
If local authorities still want to build in high-risk areas, the recommendations call for stricter building codes. California already has one of the strictest building codes for areas exposed to wildfires, but these standards apply only to the most dangerous areas.
Also, if local authorities insist on building buildings in areas exposed to wildfires, the recommendations require that those homes not be insured through the state’s FAIR plan. The state-mandated plan is California’s last resort insurance company. We provide compensation to homeowners who have been denied traditional compensation. If you do not have access to the FAIR plan, you run the risk that the homeowner is not insured at all.
“If insurance is guaranteed for all new developments, it is possible that homes will be built in areas where private insurers are not willing to take out insurance,” the report said.
The California Personal Insurance Federation, which represents the industry and represents the working group, said it supported the recommendations.
Democratic State Senator Bill Dodd, including Napa, Sonoma, and other areas hit hard by recent wildfires, will suspend access to FAIR plans for new homes in high-risk areas He said he was positive about many recommendations, including shutting down infrastructure. Building standards spending and expansion. In those places, “we need to rethink how we are developing,” he said.
He said he believes these ideas will also gain the support of other members of Sacramento. “Many of my colleagues have the same problem that voters can’t get insurance,” Dodd said. He said. “They are open to listening.”
In an interview, Lara said she was hurting homeowners by allowing the state to continue construction at those locations.
“Ownership of a home that has lost value because it is not insured is not really affordable. That is the wrong promise we make to future homeowners.” Lara said: “Before we can expand these delicate areas further, we need to have an honest conversation. Are we really aware of the risks? Or these communities are what we do. Will it only exacerbate the problems you already have? “
California Looks at Curbing Construction in Wild Fire-Prone Areas Source link California Looks at Curbing Construction in Wild Fire-Prone Areas