Insurance carriers can now carve out wildfire coverage from Nevada homeowner policies

Nevada lawmakers have enacted a first-of-its-kind law designed to keep insurance companies operating in the state as more insurers grow squeamish about doing business in wildfire-prone areas. But opponents worry the bill could make the growing insurance crisis worse.

Passed unanimously by state lawmakers and signed into law by Gov. Joe Lombardo, AB376, in part, grants insurers the ability to carve wildfire coverage out of homeowner policies sold in the state. Instead, insurers can offer wildfire coverage through separate policies or propose other innovative policies. The bill took effect Jan. 1.

Over the past few years, thousands of Nevadans, primarily those in the northern part of the state, have seen existing homeowner policies or applications for insurance denied because of wildfire risk. Other states have seen a large-scale exodus of insurance companies.

The legislation is an attempt to address that issue, according to bill co-sponsor Assm. PK O'Neill (R-Carson City) and other proponents.

"Everyone's trying to come up with a solution," said Cory Semel, president of Nevada Independent Insurance Agents. "The market's not healthy, and we want to get it back to healthy."

The law allows insurers to provide homeowners at least some level of coverage rather than having their entire policy canceled, Insurance Commissioner Ned Gaines told The Nevada Independent.

"We are the first to implement this," he said.

But some worry the bill will hollow out Nevadans' insurance policies, destroy consumer protections and make the insurance crisis worse.

"Insurance is supposed to protect people against disasters and crises," said Michael DeLong, a research and advocacy associate at the Consumer Federation of America.

Longtime Reno attorney Matt Sharp, who's represented dozens of clients affected by wildfire, agreed.

"Insurance is important to the public trust because we need it in order to have financial security and peace of mind," he said. "When you have bills that allow insurance companies to remove themselves from the role of providing for the public trust, it creates problems for the consumer."

'A difficult position'

More people are moving into forested areas and other highly flammable landscapes even as wildfires burn larger and become more destructive. Insurance companies have become gun shy about providing coverage in those areas, even in Nevada, where home insurers have been profitable every year over the last decade.

"Insurance companies are in a difficult position," longtime Nevada insurance broker and agency owner Jim DeGraffenreid, who is also a top leader in the state Republican party, told lawmakers in May while weighing in on the bill. "While they are currently profitable, the uncertainty associated with potential large-scale events could result in losses that could wipe out their profits many times over."

In 2022, 264 Nevada homeowners had their policies canceled because of threats from wildfire and another 2,400-plus applicants were declined because of the risk. The following year, 481 homeowner policies were canceled and nearly 5,000 applications were declined.

Many homeowners who can't get traditional coverage turn to non-admitted carriers — specialized insurers that operate with different levels of state oversight because of the hyper-specific niches they fill, such as taking on high-risk policies other insurers won't.

Gaines and others seeking to keep carriers in the state say they don't expect many to pull their wildfire coverage because the law has a built-in guardrail.

"If an insurer decides they are going to carve out the wildfire risk from their homeowners policy, they will have to do that for the entirety of the state. They don't get to pick and choose where they do that," Gaines said.

And, because the insurance industry is slow moving, it's unlikely any companies are going to make any knee-jerk decisions to remove coverage, he added.

"They are going to be very deliberate," he said.

But multiple former employees at the Nevada Division of Insurance expressed their opposition to the bill to lawmakers, including Tim Gahn, retired assistant chief insurance examiner at the division.

"There is nothing … explaining why such a program is even needed," said Gahn, who worked at the division until 2021. "It appears to be motivated from the perspective of concern about wildfires that have occurred … around Nevada."

A 'regulatory sandbox'

Insurers are pulling out of states nationwide where the risk is too high and they can't charge enough to cover the cost of payouts in the event of a disaster. It's not just because of wildfires — in the southeast, homeowners struggle to secure insurance because of the high threat from hurricanes.

To entice carriers to stay in Nevada, which has been threatened by numerous California wildfires such as the Tamarack and Caldor, proponents of the legislation came up with what they call a regulatory "sandbox" that offers insurance companies more flexibility in how they operate.

Regulatory sandboxes are considered safe spaces to test new business models and ideas outside the constraints of normal regulatory consequences. Insurance commissioners can grant variances and waivers if applicants can demonstrate an underlying public benefit.

"When we came up with the sandbox idea, basically it was we didn't want Nevada to become like California," Semel said. "The whole point of it was to keep carriers in play."

Under current Nevada law, carriers can't offer a wildfire-only policy, according to Gaines. And under state regulation, carriers cannot charge a separate deductible specific to wildfire.

"The sandbox would allow for a carrier to introduce that and see if it's actually a viable product," he said.

And even if new ideas are introduced through the regulatory sandbox, guardrails will still be in place, Gaines said.

"We aren't going to let anything through that is harmful to the public," he said.

But DeLong, the research associate, said sandbox programs are often used by insurance companies to avoid oversight.

"It's better for consumers to buy one homeowners policy that covers everything. This new law is a step away from that," he said. "It's more cumbersome."

Semel said he also wants the sandbox program to fail, but not in the way opponents do.

"We hope it fails because no one's using it because the market's normalized again," he said. "It allows the carriers to stay in play, come up with alternative options that would appease them to stay in the market, but at the end of the day, when they see that things aren't as bad as they thought, they start backing off these things and going back to normal."

Failed FAIR Plan

The passage of AB376 coincided with the death of another bill that would have advanced a state-run wildfire insurance program.

Assm. Jill Dickman (R-Sparks), a co-sponsor on AB376, introduced a separate piece of legislation that would have offered last-resort insurance to homeowners unable to find coverage anywhere else through a Fair Access to Insurance Requirements (FAIR) Plan. That bill, AB437, died during the session.

The plan, which would have been administered by the state but funded by insurance companies operating in Nevada, would have offered minimal levels of coverage to homeowners who had been denied coverage from three standard insurers. Qualifying homeowners also would have been required to implement wildfire protection measures at their properties.

Several dozen states offer similar plans, Dickman told lawmakers in April 2025.

The bill had support from the Nevada Fire Chiefs Association and Washoe County but drew opposition from groups such as the American Property Casualty Insurance Association, a national trade association for home, auto and business insurers.

The FAIR Plan would have mitigated some of the issues AB376 creates, such as unpredictability in the marketplace, according to Sharp, the Reno attorney, but wouldn't have solved the problem. Insurance companies don't want to pay into a FAIR Plan, and Nevada's market isn't large enough to keep insurers in the state if they find the environment unfavorable, he said.

Dickman, who declined to speak with The Nevada Independent, thought otherwise.

"It is a start; we have to start somewhere," Dickman told her fellow lawmakers during the session. "We have been talking about this, and talking about this, and talking about it, and there is never any action taken. We are looking for the perfect plan, and if we put this off for a couple of years … by that time, we are going to be in a crisis."