Time for leadership on wildfire solutions: California's Lara
California Insurance Commissioner Ricardo Lara (pictured) has said regulators and insurers must now show leadership in the wake of the devastating Los Angeles wildfires.
Lara, speaking at the Bermuda Risk Summit, taking place in Bermuda this week, said the fires had caused between $28 billion and $53 billion in insured damage.
To avoid a repeat of the disaster, he said regulators and insurers had to push for more mitigation of climate-based natural catastrophes including the need to encourage hardening (increasing the fire resistance) of homes.
“When we talk about what we can do, mitigation, mitigation, mitigation is key,” Lara said. “Hardening homes reduces losses and we know it enhances availability and affordability. It lowers insurance costs and builds confidence among insurers. It contributes to sustainability in our markets.
“This is an opportune moment for regulators and insurers to step up and provide the necessary leadership to address the challenges we face.
“Just as the original concept of insurance was so revolutionary and creative, we are once again called to be bold and creative at this pivotal moment in our history and I hope you will join me in that effort.”
Earlier Lara said the cost of the wildfires meant admitted insurers and the California FAIR Plan – the state’s insurance backstop - suffered significant losses, so much so that the FAIR Plans was forced to carry out an assessment of insurers for the first time since 1993.
Under reforms implemented shortly before the fires broke out, future assessments for the FAIR plan would include a levy on California policyholders and not just on private insurance companies. He said he hoped this “skin in the game” would force local governments to do a better job of restricting building in at risk areas and using stricter building codes.
Lara said over 30,000 claims had been filed since the January fires with over 15,000 structures destroyed in the fire while 1 million people were displaced.
Lara noted that the LA blaze was the 115th wildfire that had occurred since he took office in 2019.
“This isn’t going anywhere,” he said.
He added that one of the biggest challenges the Insurance Department faced was the rapid spread of misinformation, which was countered with a claims tracker reporting on claims and payments by insurers.
“This showed the market was working as it was supposed to, as opposed to the misinformation,” he said, recalling that he was in the grocery store and heard people in the queue saying that insurance companies were going to go bankrupt, which was news to him.
“We became the first rebuilding responders,” he said, noting both political extremes were making false claims.
He also praised insurers, saying they paid out $7 billion in claims in the seven weeks after the fires.
Looking ahead, Lara welcomed collaboration between state regulators, saying they were aimed at reducing the risk for communities.
“This is the most effective way to make affordable insurance accessible,” he said. “We are not powerless here. We have choices and science driven strategies which can enhance safety.”
He said the National Association of Insurance Commissioners’ Climate Resilience Strategy was the first coordinated effort by US insurance regulators to implement resiliency actions.
He said resilience was being achieved through a gradual process using best practices from different states, including using catastrophe models drawing on the example of Florida while also learning from the resilience programmes in Alabama, North Carolina and Louisiana.
He noted that Alabama had recently completed 50,000 resilient homes which would benefit from more affordable insurance.
He said California’s resilient homes bill would be in place in the next week.
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