In the aftermath of California’s wildfires, homeowners who live in fire-prone areas have struggled to renew their insurance policies with companies that cannot, or refuse to, pay. Now, a Central Valley company has gone out of business after failing to pay out claims to the thousands of people who lost their homes in the Camp fire.
Facing $64 million in claims from Paradise residents, the Merced Property and Casualty Company liquidated and passed on its claims to the state’s Insurance Guarantee Association on Monday, Think Progress reports. The fire “completely overwhelmed this company,” Nancy Kincaid, press secretary at the California Department of Insurance, told ABC 30. “Looking at the number of claims that they would have … it left them insolvent.”
Climate change and urbanization in what’s known as the “wildland-urban interface” have increased fire risk, and insurance claims have risen along with it. As Pacific Standard reported in August, last year’s fires cost insurance companies over $12.5 billion in insured losses to homes; this number will likely soon be topped by another record-breaking year. This is making it difficult for Californians to insure their homes, pay increasingly high premiums, or keep a mortgage.
In response, lawmakers are pushing to hold these insurers accountable. Some California residents say that insurance companies use models that miscalculate fire risk, while state regulators argue that companies should be forced to cover homeowners regardless, since many of them have nowhere else to go. Jackie Botts writes:
Former Placer County Emergency Services Manager John McEldowney worries that, rather than push homeowners out of high-risk areas, a lack of affordable insurance options will trap them in. If the state doesn’t keep insurance companies from pulling out of high-risk fire areas, the Sierra Nevada may see a “significant negative impact on people, on home prices, on home value, [and] the ability to sell. … It’s only going to get worse.”
Although California’s insurance agency says no other company is in as dire a situation as Merced, the state has warned that the problem of insurance availability will only continue to grow, Bloomberg reports.
