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  • California wildfires: can insurance markets handle the risk?

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California wildfires: can insurance markets handle the risk?

Source(s):  RAND Corporation (RAND)

To assess how fire risks will affect the California insurance market, and consequently homeowners, RAND researchers undertook a novel study in two fire-prone areas in Northern and Southern California. They found that, while the market in lower-risk ZIP codes within those two areas was working relatively well as of 2017, higher-risk ZIP codes faced challenges.

The study focused on two areas: a 1.9-million-acre region in the Sierra Nevada foothills spanning parts of Placer, Nevada, and El Dorado Counties in Northern California, and an 860,000-acre region in western San Bernardino County, east of Los Angeles in Southern California.

In the Northern California study area, the researchers found that the average number of acres burned each year may double by mid-century and double again by 2100 under a business-as-usual GHG emissions scenario. The researchers project that an aggressive and successful GHG emissions control strategy would stabilize the average number of acres burned in the second half of the century, keeping the average annual risk at mid-century levels. In the Southern California study area, the researchers project that the number of acres burned may not change substantially.

Policymakers, insurers, and homeowners all are exploring how to adjust to changing wildfire risk in California. This research is designed to help them consider policy options for the insurance market.

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  • California wildfires: can insurance markets handle the risk?
  • Publication date 2020
  • Author(s) Dixon, Lloyd; Tsang, Flavia; Fitts, Gary
  • Number of pages 4 p.

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