Fire insurance prices out residents, leaving more at risk in future disasters

When Renneau Daly-Brewster received a nonrenewal notice in September from her fire insurance company American Modern, she panicked.

It was the second time her homeowners insurance was not renewed by her insurer since the Nuns Fire in 2017, part of a wider statewide pullout by insurers from burn zones that has hit Sonoma Valley residents, particularly those in Glen Ellen and Kenwood.

Amid California's recent era of catastrophic wildfires, the cost of fire insurance skyrocketed, with many insurers opting to curtail or cancel coverage entirely, deciding it is not worth the growing risks.

Homeowners have been left to sort out an upended marketplace, with patchwork protections from the state that have fallen short of shielding many insurance customers. "It's kind of like pot luck, you take you chances" Daly-Brewster said. "Hopefully we've done enough to protect our house, but there's always that worry."

While the 2017 firestorm that hit Sonoma County did much to set the nose dive in motion, it became more dramatic after subsequent disasters, including the massive Thomas Fire in late 2017 in Ventura County, and the deadly Camp Fire in Butte County in 2018.

"Much like a series of mega-hurricanes put Florida home insurance, property insurance market into a tailspin, our series of mega-fires sent the California marketplace into tailspin," Bach said. "Insurance executives, they see the red ink, they see the numbers. They don't like 'em, so they react."

Risky business As many fire insurance companies have pulled out, those that remain have placed a higher burden on homeowners to protect their homes, often requiring residents to "fire proof" their home with setbacks and fire-resistant safeguards and materials.

Looking out over Sonoma Valley from the Diamond A Ranch Estates, Mark Hannon recalled the gust of Diablo winds that fueled the 2017 firestorm. The Nuns Fire spared Diamond A Ranch, but parts of the surrounding neighborhood west of Boyes Hot Springs have some of the highest risk pools in Sonoma Valley.

Insurance company requirements are often the only way residents in high-risk areas are able to access or reduce their fire insurance premiums, according to Mark Hannon, a member of the Diamond A Fire Safe Council who said he had his fire insurance canceled in 2018 by California Automobile Association. These fireproofing costs can be hundreds, if not thousands of dollars.

"I've done a half a dozen things to my home. I spent about $15, 000," Hannon said. "And I think I reduced the fire risk to the high risk aspects of my structure by about 80% I think it's good that (the insurance companies) are doing this, because I think it will spur people to take action."

Hannon created setbacks against his home to protect against falling embers, he's fire "hardened" the rafters so sparks won't fly into dry tinder, and he's cleared vegetation to create a buffer zone around his property. But other residents like Daly-Brewster said insurance companies' fireproofing demands are a headache for her and her husband on fixed-income.

"They put more and more demands on you. It's like Big Brother," Daly-Brewster said. "Are (they) gonna come and check on me again?" The increased monitoring of homes is part of a strategy to safeguard the "bad bets" of insuring a fire-prone region, Bach said. "It's a hard combination of business dynamics, climate change, and there's a little bit of politics."

Bach explained the fallout from destruction in the 2017 and 2018 fires, when insured liabilities topped $30 billion. The record level of insurance payouts caused insurance companies to dip into their own insurance, called "reinsurance," which is a system that protects insurers from very high claims.

As more historic fires ripped through the North Bay in the following years, reinsurance companies raised their rates and the costs trickled down to consumers, Bach said.

She added that technological advancement in GPS mapping and risk-assessment has also contributed to insurance companies raising rates or dropping out of certain marketplaces.

"They used to take the risks a lot more blindly," Bach said. "They just didn't have the tools to literally see the roof, and the condition of the roof on the house that they were insuring. But now with technology and all these tools that are being sold to them, and data that's been sold to them technology makes the risks much more vivid."

But insurance companies also are on the line to cover more expensive properties than 10 years ago, according to Michael Soller, deputy insurance commissioner with the state Department of Insurance.

"What has increased is the amount of insurance coverage, which was about $500, 000 in 2009 to almost $1 million in coverage in 2019, which is when our data runs out," Soller said.

For Daly-Brewster, who lives offa fixed income - her retirement account - the higher premiums have created far greater stress since the Nuns Fire.

Sewing together singed pockets California's insurance officials and lawmakers in Sacramento have struggled to find ways to address the crisis. The state Insurance Department has been left to enact a series of moratoriums on insurer pullouts from fire zones. The state also is seeking to become the first to require insurers to lower premium costs for property owners who make improvements to reduce their fire risk.

Meanwhile, monthly fire insurance premiums in Sonoma Valley, particularly in the scarred areas of Glen Ellen and Kenwood, have gone up about $1, 000 per month since 2017, according to data from the California Department of Insurance.

"My instinct would be that (insurance companies) have probably now overstated the risk," Bach said. "The insurers have such a compelling argument as to why they have to charge, you know, raise their rates. And I think so they've gotten almost every single rate increase that they've asked for."

The new requirement on insurers, which Soller said would go into effect in mid-October, would require insurance companies to recognize residents' efforts to fireproof their homes and to factor those efforts into the pricing of insurance upfront.

"It needs to be a shared responsibility," Soller said.

It's part of a changing perspective by wildfire experts, insurance companies and public leaders in how they respond to more severe wildfires. The message is clear: Preventing devastating wildfires today must be a collective effort.

In other words, the days of Smokey Bear's famed adage, "Only you can prevent forest fires," are past. "It should be like, 'Only you and your neighbors and your insurance company and your local government and the federal government can prevent forest fires," Soller said. "It's mitigation on a massive scale like we've never seen before."

Contact Chase Hunter at [email protected] and follow @Chase HunterB on Twitter.