California continues to face wildfire risks. Insurers think they have an answer.



Enter the insurance industry, which says it can no longer afford to back homes facing a high risk of burning up each year. It’s pushing for a new model that would account for future climate change risks — an approach that California has been alone in resisting.

“People don’t want to admit that the risk is going up and that in order to be resilient, they have to change how they’re doing things,” said Nancy Watkins, a consultant with the firm Milliman who analyzes risks for insurance companies.

California’s wildfire problems are fueled by decades of fire suppression, climate change and a persistent desire to escape city life. The state has seen some 40,000 structures destroyed since 2017 and the largest conflagrations in state history.

Many property owners are already struggling to find insurers willing to renew their policies. The state also has intervened, demanding that they continue covering at-risk homeowners for the time being. But insurers dropped about 212,000 California properties in 2020, and about 50,000 homeowners — many in the Sierra Nevada foothills on the eastern side of the state — couldn’t find another option on the private market.

That has led to a reckoning over whether California should allow insurers to account for future climate change risks.

The industry is arguing the state should let the market reflect the true risk. Insurers say the time is ripe to unlock a long-sought policy tool: Basing rates on estimates of fire damages to come, rather than actual damages from the previous 20 years.

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