'Chronic Climate Risk' Worrying Insurers, Prompting Policy Changes

Homes at risk for wildfire damage may not be insurable in the coming years. A new report from insurance broker Aon finds that losses from wildfires surpassed the $10 billion mark for the second year in a row in 2018.

Currently, fires are considered "secondary" risks compared to earthquakes, flooding, and hurricanes, which are considered "primary" risks that are insurable under special circumstances only. Earthquakes, for example, require a separate policy. Birny Birnbaum, executive director of the Center for Economic Justice, tells CBS News, "risks that were once insurable … will become uninsurable. Insurers have long excluded wind in coastal states and earthquake and flood everywhere from homeowners' policies."

Consumer advocate Bob Hunter, director of insurance for the Consumer Federation of America, explains that insurers are reacting to the growing threat and actuality of wildfire damage by raising rates, adding deductibles into contracts to limit their exposure and pay out less to policyholders, who in turn have greater financial exposure.

Steve Bowen, Impact Forecasting Director and Meteorologist, said: "With annual wildfire industry payouts expected to exceed USD $10 billion for the second consecutive year in the United States, the standard assumption of wildfire being a secondary peril may evolve in the future. While insurers remain firmly in position to handle the volume of claims in the aftermath of recent events, these heightened losses put a further spotlight on the growing risk of the peril around the world. The growth of exposure into known fire locations and the prospect of more weather and climate-driven effects will require continued focus on mitigation initiatives."

Read more