The devastating January wildfires in California have been fully contained, leaving roughly 58,000 acres destroyed and more than 16,000 structures razed. As homeowners begin taking the necessary steps to rebuild, both they and insurers alike are left wondering what the true toll of the devastation is.
The dollar figure can vary depending on a number of factors, such as claims payouts, property values and even the expert weighing in, but preliminary estimates place the low end of the scale at around $30 billion. Adding in
Nuances in the details of property loss figures, which are based on the cash values of damaged properties, and insured loss figures that typically include claims payouts create fluctuations when trying to pin down a more finite number.
Katherine Hempstead, senior policy advisor at the Robert Wood Johnson Foundation, told Digital Insurance that it's still too soon to put an accurate price tag on what rebuilding efforts will cost.
"One factor that will play out over time is how long it really takes to rebuild, and how much prices for construction and rental housing will go up in the next few years," she said. "There are estimates of those trends built into the estimates of insured losses, but they may be lower than or higher than what actual costs will look like."
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Recent data from the
The report, which examines the correlation between homeowners insurance pricing and climate risk, determined that those living in areas subject to frequent natural disasters often pay more for coverage and face a higher rate of policy non-renewals. Climate change by extension has increased the cost of operations for insurers as well.
Industry experts like Todd Greenbaum, president and chief executive of billing and payment firm Input 1, understand that it's a domino effect of increased climate events leading to more claims, which then raise premiums, but stronger climate mitigation measures are needed to keep premiums in line with risk, he said.
"This is a free market economy, supply and demand," he said. "If people feel that owning a piece of property in Florida is just simply unaffordable because of the insurance, they're going to move inland, or they're going to move out of the state."
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Amid the waves of litigation facing insurers and global climate change, the latter is often to blame for rate hikes and non-renewals, according to the FIO.
Below are insights into the latest developments out of California and how officials are working to ensure homeowner recovery efforts aren't stymied.
Foreclosure ban extended for Los Angeles County wildfire victims
Officials with the Federal Housing Administration announced on March 6 that they will extend the moratorium on foreclosures through July 7 — giving more than 100,000 FHA-insured loan holders breathing room to recover.
The decision to push the deadline back from its prior April 8 date came after
"Supporting our neighbors so they can build or rebuild their future, including when disaster strikes, is a core part of HUD's mission and we will continue providing help during hardship," Turner said in a press release.
The move from HUD follows in the wake of similar stoppages from various state-chartered institutions and major mortgage entities, which are providing borrowers in the impacted regions with forbearance on home loans for a minimum of 90 days.
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California puts climate regs on hold to speed up recovery efforts
Following California Gov. Gavin Newsom's declaration of a
The declaration suspends "state statutes, rules, regulations and requirements that fall within the jurisdiction of boards, departments and offices within the California Environmental Protection Agency and the California Natural Resources Agency," which include the California Environmental Quality Act and the California Coastal Act.
The Environmental Quality Act mandates that local and state agencies remain aware of the environmental impact of their efforts and do their best to minimize the aftereffect. The Coastal Act enacts strict guidelines around coastal development and preservation.
"This year has already seen some of the most destructive wildfires in California history, and we're only in March," Newsom said in a statement.
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The unrealized costs of wildfire damages
Wildfires are a multi-trillion dollar headache for the U.S., as properties in Colorado, Utah, Texas and other states are at risk for cumulative billions of dollars in damages.
New data from
The next highest state was Colorado, recording more than 317,000 vulnerable properties and a total exposure of $197 billion — only 16.3% of California's total dollar figure.
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Rising insurance costs push homeowners towards moving
Between insurance premiums trending upward and a recent spate of natural disasters, many homeowners are considering relocating as the most logical next step.
Research conducted by mortgage fintech Maxwell that polled roughly 1,200 homeowners found more than half "may consider" or "would strongly consider" moving or selling their homes sometime in the next five years if rates keep increasing. A separate 46% were concerned that they might not be able to afford housing payments in the coming years, as insurance and property taxes become more expensive.
"It's clear; homeowners insurance and taxes are taking up an increasing share of a family's monthly housing cost," John Paasonen, Maxwell co-founder and CEO, said in a press release.
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Milliman actuaries weigh in on the growing shadow of wildfires in California
Zora Law and Nickolas Alvarado, senior actuary and consulting actuary with Milliman respectively, say that the recent California wildfires highlight the worsening insurance landscape in the state — with further predictions that blazes will be more frequent and expensive in the coming years.
In discussing high points from a
"The insurance market is playing its role in mitigating the financial burden caused by natural disasters, but it also requires a sustainable and healthy economic and regulatory environment to function effectively," the pair told Digital Insurance.
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