Why Cal­i­for­nia needs to pur­chase wild­fire in­sur­ance

Lodi News-Sentinel - - OPINION - RI­CARDO LARA AND TIM ED­WARDS Ri­cardo Lara is the commission­er of the Cal­i­for­nia Depart­ment of In­sur­ance. Tim Ed­wards is pres­i­dent of Cal Fire Fire­fight­ers.

The one small sav­ing grace over these last two years of hor­ren­dous wild­fires in Cal­i­for­nia was that they came at a time when the state had am­ple re­sources to re­spond with­out hav­ing to di­vert money from schools or health care.

That won’t al­ways be the case.

As a re­sult of cli­mate change, we can ex­pect cat­a­strophic fires to oc­cur with grim reg­u­lar­ity. We also know that state budget sur­pluses will come and go.

The an­nual cost of fight­ing wild­fires is as un­pre­dictable as the fierce winds that drive those fires. In each of the last two years, the state has spent nearly $1 bil­lion on cat­a­strophic-wild­fire sup­pres­sion. In each case, that was more than dou­ble the amount that had been bud­geted.

For­tu­nately, the state had the cash on hand to cover the dif­fer­ence. But even if it didn’t, the money would still have to be spent.

No ex­pense can be spared in de­ploy­ing fire­fight­ers and equip­ment to do what­ever it takes to pro­tect lives and prop­erty. And the fire­fight­ers them­selves must be protected and pro­vided for as they face tremen­dous dan­gers in these bat­tles. The cost must be borne, and the bills must be paid.

This month, Gov. Gavin New­som and the Leg­is­la­ture swiftly ap­proved a com­pre­hen­sive re­sponse to pro­tect­ing the state and tax­pay­ers from util­ity-caused wild­fires, which have be­come in­creas­ingly de­struc­tive.

But still more needs to be done to pro­tect tax­pay­ers from all other causes of cat­a­strophic

wild­fires and to en­sure that those on the front lines of these wild­fires have all the tools they need to both suc­ceed and sur­vive.

That’s why it’s crit­i­cal that the state gov­ern­ment ex­plore ways to trans­fer the fi­nan­cial risk of an­other cat­a­strophic wild­fire sea­son away from tax­pay­ers and ratepay­ers.

Leg­is­la­tors, in­clud­ing state Sen. Bill Dodd (DNapa), as well as Trea­surer Fiona Ma, have lined up be­hind Se­nate Bill 290, which would al­low Cal­i­for­nia to do just that.

The idea is one that should make sense to ev­ery home­owner and busi­ness in Cal­i­for­nia, be­cause it’s some­thing they do rou­tinely to re­duce their fi­nan­cial ex­po­sure to cat­a­strophic loss: ob­tain dis­as­ter in­sur­ance.

The bill would au­tho­rize the gover­nor to pur­chase in­sur­ance to help limit the costs in­curred by the state in re­sponse to wild­fires or other nat­u­ral dis­as­ters. Al­though Cal­i­for­nia has never done this, it is an es­tab­lished busi­ness prac­tice for other gov­ern­ment agen­cies.

The Fed­eral Emer­gency Man­age­ment Agency, for in­stance, pur­chases rein­sur­ance poli­cies to pro­tect against hav­ing its emer­gency flood funds de­pleted dur­ing a ma­jor event.

Closer to home, the state of Ore­gon has been pur­chas­ing wild­fire in­sur­ance for decades, and over 40 years has re­ceived $102 mil­lion in claims while pay­ing $61 mil­lion in pre­mi­ums.

Some mod­els sug­gest that if Cal­i­for­nia had such in­sur­ance poli­cies in place, it would have saved nearly $600 mil­lion over the last two years.

Such sav­ings would al­low the state to spend more on wild­fire sup­pres­sion and mit­i­ga­tion mea­sures that could bet­ter pro­tect Cal­i­for­ni­ans against worse catas­tro­phes in the fu­ture.

For ex­am­ple, the money saved could be used to pay for more fire en­gines so fire­fight­ers could re­spond to fires faster. The state could also bring on ad­di­tional fire­fight­ing per­son­nel, ex­pand de­fen­si­ble spa­ces around high­risk com­mu­ni­ties and ramp up for­est man­age­ment ac­tiv­i­ties that are cur­rently treat­ing just 20% of the land that ide­ally should be treated each year.

A study by the Na­tional In­sti­tute of Build­ing Sciences es­ti­mates that for ev­ery $1 spent in mit­i­ga­tion ac­tiv­i­ties in “wild­land-ur­ban in­ter­face” ar­eas, where homes are near land prone to wild­fires, $3 in fu­ture dis­as­ter costs are saved. Buy­ing dis­as­ter in­sur­ance would also re­duce fis­cal volatil­ity in the state budget.

We can fore­see the grow­ing risks that lie ahead. As the gover­nor’s budget pro­posal stated, “Weather events are more ex­treme, winds blow with more in­ten­sity for longer du­ra­tions and hu­mid­ity lev­els are lower for longer pe­ri­ods of time.”

One spark can trig­ger tens of mil­lions of dol­lars in fire­fight­ing costs. Cal­i­for­nia needs to have sen­si­ble tools to deal with its fi­nan­cial ex­po­sure from ever more fre­quent and se­vere wild­fires.

Dis­as­ter in­sur­ance for the state should be part of the equa­tion.

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