California wildfires yield $845 million in losses

San Jose Mercury News (CA)

Sept. 06--Residents and business owners have filed more than $845 million in insurance claims as a result of this summer's Carr and Mendocino Complex wildfires, the first data on what's likely to be massive bill from a series of fires that have hit the state this year.

More than 10,000 insurance claims have been filed for property losses as a result of these two Northern California fires, which damaged or destroyed more than 8,800 homes, 329 businesses, and more than 800 private autos, commercials vehicles, and other types of property, Insurance Commissioner Dave Jones said on Thursday morning.

Those numbers are likely to climb as claims are adjusted and more people file with their insurers, Jones said.

"The worst may be yet to come," Jones said, noting that wildfire season peaks in the fall. "The problem is growing. The risk is growing. The trajectory is in the wrong direction."

The news came as another major fire erupted in northern California. The Delta Fire, north of Redding in Trinity National Forest, has grown to 15,000 acres and threatens hundreds of structures.

Commissioner Jones also updated data for the dozens of fires that erupted during a windstorm last October, destroying more than 7,000 buildings in at least eight counties across Northern California and killing 43 people, boosting the total losses to $10.4 billion.

Those Sonoma and Napa blazes have become the costliest wildfires in American history in terms of insured loss, with property owners in Sonoma and Napa counties filing for $7.9 billion and $1.5 billion in damages, respectively. That $9.4 billion in claims from the two counties is a slight increase from the $9 billion reported last December. The 1991 Oakland Hills fire had previously held that title, with $1.7 billion in insured losses.

Fires trigger other expensive natural disasters, he added. Residents, business owners and others have filed more than $736 million in insurance claims as a result of the Montecito mudslide in January, which destroyed more than 152 homes and 11 businesses, Jones said.

The claims outlined Thursday underscore the unprecedented destruction California has endured over the past two years, Jones said.

Confronted with losses, insurers are increasingly opting to not renew some policies, or are declining to write insurance policies for high-risk homes, Jones said.

He urged homeowners to do three things: Review your policy, get a preliminary estimate from your insurer of the replacement cost, then talk to a contractor to get the actual cost of replacing your home. He recommended buying insurance that exceeds the replacement cost by 25 to 50 percent , because "surge pricing" after a fire can inflate the cost to rebuild. The demand for materials and labor causes prices to go up, he said.

"Most people mistakenly believe that it will cost to replace what it cost when they bought it on the market," he said. "Often, the cost of replacement can exceed the market value of the home."

The commissioner also released a new report, "Trial by Fire: Managing Climate Risks Facing Insurers in the Golden State," which describes how climate change is a contributor to wildfire losses in California.

"We are simply not doing enough, fast enough to get ahead of this problem," said Jones.

The report comes in advance of next week's Global Climate Action Summit, a three-day event in San Francisco which will bring leaders together from around the world to celebrate the achievements of states, regions and cities -- and launch accelerated action, so the nation is on track to realize the goals of the historic Paris Agreement.

Climate change doesn't cause wildfires. But it increases the likelihood and intensity. Advances in computer modeling allow scientists to make quantitative connections between extreme weather events and climate change.

Climate change is making large wildfires more common because global warming has increased dry fuel, turning trees and grass into tinder. A 2016 study found that human-caused climate change was responsible for more than half the documented increases in fuel aridity since the 1970s and for doubling the cumulative forest fire area since 1984.

But rising damage costs are partly because of demographic shifts and development decisions that make natural disasters more destructive. The rise in population and wealth in "wildland urban interface" is contributing to much of the increase in destruction caused by wildfires. The number of buildings has ballooned in parts of the country susceptible to fires as the population in those places has also increased.

In California, 3.6 million of the state's 8 to 9 million housing units are located in this "wildland urban interface."

Climate change creates three types of vulnerability for insurers: property loss, litigation and investment declines, said Evan Mills of Energy Associates, a California-based energy and environmental consultancy, the climate policy experts at UC Berkeley School of Law's Center for Law, Energy & the Environment, and the California Department of Insurance.

"Simultaneous and correlated economic damage can all occur together, and can compound one another, making the impact larger than any one of them alone," said Mills, who authored the "Trial By Fire" climate change report.

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