Jessica Brookhart lives south of Gold Hill in the mountains west of Boulder. She built her home with her husband in 2017. That home is currently uninsured.

Facing a three-fold increase in her Farmers Insurance policy renewal last year, Brookhart shopped around, only to discover significantly diminished options from her broker.

“He straight up told me, ‘All the small carriers left because of the Marshall Fire,’” Brookhart said.

Her agent got her a policy with Allstate. But after a company representative visited for an inspection, her policy was canceled. Brookhart is still in the process of figuring out why.

“We have a bomb-proof house,” Brookhart said of her home that’s constructed of corrugated steel and stucco. “If my house can’t be up here, the homes around me certainly can’t be insured either.”

Brookhart and her husband built on a lot that burned, along with 168 others, in the 2010 Fourmile Fire. At the time, Fourmile was the most destructive fire in Colorado history. It’s been surpassed seven times since.

Kitty Stevenson lives in Sugarloaf, also in the mountains west of Boulder, and also on the burn scar of a previous fire. The 1989 Black Tiger Fire burned the property Stevenson now owns, along with 43 others. At the time, it was the most destructive in Colorado history. It has been surpassed 10 times since.

Stevenson had a similar experience to Brookhart. After the Marshall Fire — the current most destructive fire in Colorado history — her insurance company, Argenia, said it was no longer offering new policies in her community, though it offered to grandfather her in for $17,000 a year, a 340% increase. Stevenson sought alternatives but was denied by almost all the major carriers. After being uninsured for four months in spring 2022, Stevenson landed a policy with Allstate.

But as was the case with Brookhart, an inspector later told her, “Yeah, [your property] is completely not insurable,” and she was dropped. Stevenson eventually landed a policy with State Farm. That policy is set to expire in a couple months.

The Stevensons and Brookharts are not alone in their insurance woes. Many residents in Boulder’s mountain communities are starting to have trouble getting adequate home insurance — or any insurance at all. And while the Marshall Fire struck the plains, it cost Colorado insurers more than $2 billion. Such a hit to their reserves ignited a reassessment of properties they’re insuring across the state.

“One major event for an insurer can wipe out 15 to 20 years worth of underwriting profit,” said Michael Barry, the chief communications officer with the Insurance Information Institute, a industry-funded, consumer information organization. “One event.”

Many such events are happening of late, with increasing frequency.

This is causing insurers across the country to back out of catastrophe-prone areas, potentially leaving entire communities vulnerable to the costs of disaster without adequate aid. State Farm, for instance, announced last month that it will no longer sell home insurance to anyone living in California, due to “growing catastrophe exposure,” as climate change brings more wildfires and floods. Many fear this portends what’s to come in Colorado, as certain communities — or the state — might be written off en masse.

“We are in — and it’s a cliche — a new normal,” said Carole Walker, executive director of the Rocky Mountain Insurance Association, a nonprofit insurance communications organization representing property and casualty insurers in Colorado, New Mexico, Utah and Wyoming. “We’re seeing escalating catastrophic risk, whether that be wildfire, tornado or hurricane. Add to that historic, skyrocketing inflation and increasing costs to repair and rebuild. So not only are we seeing a huge increase in the number of claims, but also an increase in the cost to pay those claims.”

Smaller insurers, when faced with massive disasters, run the risk of insolvency, where they can’t pay out their claims. Merced Property & Casualty Co. had too much exposure in Paradise, California, and was unable to cover the claims brought by the 2018 Camp Fire. The company was liquidated. Hurricane Ida caused a similar problem for two regional insurance companies in Louisiana.

“A smaller, less well-capitalized home insurer has to get its market share right,” Barry said. “And a lot of Coloradans, in the view of certain insurers, are potentially living in harm’s way.”

Colorado implements FAIR Plan as insurers retreat

Trying to address this new reality, legislators in Denver passed a new law this year that will provide at least some insurance to those who can’t get it through normal channels. Called the Fair Access to Insurance Requirements plan, or the FAIR plan, it will require insurance companies to fund a quasi-government organization that offers up to $750,000 in coverage to residents who can’t find any on the commercial market.

Under the law, insurance companies can’t raise their policyholders’ premiums to cover FAIR plan expenses, but they can recoup losses through customer fees — burdening their policyholders with the costs.

“In a way, it’s all of us paying, because everybody’s premium might go up a little bit,” said Judy Amabile, a state representative for Boulder and one of the bill’s sponsors. “But that is kind of how insurance works.”

But is it sustainable to have those living in less risky areas help cover those living in riskier ones? The Ponderosa pine landscape around Boulder, for instance, is adapted to fire, with a natural frequency to burn every decade or so. Should we be surprised when a home built in that area burns?

Amabile suggested wildfires are not the same level of threat as climate disasters seen in other states.

“It isn’t the same in Colorado as it is in Florida, where you actually do know, right there by the ocean, it is catastrophic,” Amabile said. “Or in New Orleans, where it’s underwater.”

Amabile cited a constituent who lives in Sugarloaf who couldn’t find insurance, couldn’t sell her home, and moved out of the mountains. Amabile suggested this was unreasonable.

“There have been fires on Sugarloaf, but it isn’t the same as along the coast, where [disaster] is inevitable,” she said.

Because of this, Amabile said that Colorado’s FAIR plan, in addition to being “bare bones,” is hopefully a temporary solution for many. Maybe if we have a few years without wildfire in a given area, she said, insurers might return.

Vincent Plymell, an assistant commissioner of communications for the Colorado Division of Insurance, also seemed to think that insurers’ retreat is temporary — or at least that insurers could be swayed to stay. He said one hope of the FAIR plan is enticing companies who were thinking of leaving to stay in Colorado by having FAIR take on those risky properties.

“One of the ideas [of the FAIR plan] is that if some of these higher-risk homes can be covered by the FAIR plan, it enables [insurance] companies to expand their plans in other ways,” Plymell said. The FAIR plan is a “fairly bare bones policy, so maybe [insurers] are able to offer something like contents coverage rather than the full homeowners insurance.”

There’s also the possibility that, rather than established insurance companies “expanding in different ways,” new companies will take on the risk older companies are unwilling to.

Barry, of the Insurance Information Institute, said these new insurers could arrive with “advanced, predictive analytics” to help them them profit—even in a risky state.

“It’s a very competitive marketplace,” Barry said. “There may well be other insurers who feel they can assess the risk and price policies better than their competitors and step in where other insurers decided to move out.”

In the meantime, Amabile acknowledged there is a chance that some insurers will leave Colorado entirely, shirking FAIR plan fees that cover homes they were trying to avoid in the first place.

“We did have extensive conversations with the insurance industry and others,” Amabile said. “I think we struck a good balance. But if we continue to have catastrophic fire events, companies could leave.”

Research suggests that’s not far-fetched. Scientists at the University of Montana recently found that each year since 2000, in the central Rocky Mountains, “wildfires are burning nearly twice as much area on average compared to the last 2,000 years.”

Walker of the Rocky Mountain Insurance Association said given how FAIR plans have played out in other states, the stakes of setting up a FAIR plan correctly are high. She cited Florida, where the state’s FAIR plan “became the market of choice, rather than the market of last resort.”

Walker said this led to a dismantling of the private insurance market in the state. And once insurance is a state-run entity, is there the political will to charge the rates that need to be charged to cover the level of risk? Probably not.

Insurance for those who need it most: ‘We’re going to end up losing people who really contribute to our society’

Katie Goodrich, an insurance lawyer with MoGo LLC, is working with survivors of both the Marshall Fire and the East Troublesome Fire to sue insurers for funds they feel their policies entitle them to. She said the FAIR plan should be thought of as mainly a vehicle to help those who need it most.

“I mean, $750,000, that’s maybe a condo up here [in Granby],” she said, citing the plan’s potential impact where she lives.

She gave the example of an uninsured home burning. If that uninsured home was owned by someone barely getting by as it was, “they’re going to leave Colorado,” she said. “Because Colorado is one of the more expensive states to live in. So we’re going to end up losing people who really contribute to our society.”

People like firefighters, police officers and teachers, Goodrich said. A resident of Granby, near where the East Troublesome Fire burned, Goodrich said her local community is already struggling with housing.

“The real danger is losing our local populations up here and just having second homeowners everywhere,” she said. “Then you have issues staffing local restaurants, you lose the vibrancy and diversity in these communities.”

She added that many businesses in Granby already have to offer housing to employees because service-level workers can’t afford to live in the vacation destination.

Yet some who would potentially use the FAIR plan say it isn’t enough. Stevenson of Sugarloaf, who said she was asked to testify in favor of the FAIR plan, wasn’t a fan. It’s insufficient, in her view.

“It’s totally not good,” she said. “It’s something, but it doesn’t really address the [coverage] concerns. By the time you get a million dollars, you’re going to have maybe half the house you had.”

The bill limits coverage for personal property at $750,000. Stevenson said it would cost $2 million to rebuild her house.

For Brookhart and her husband near Gold Hill, who built their home for $430,000, the FAIR plan could provide some relief. As it is, they’re already getting squeezed and questioning if they’ll be able to stay where they are long-term.

“Between my taxes and insurance doubling and tripling every year, that in itself is making our house unaffordable for us,” Brookhart said.

Though how much relief the FAIR plan will provide depends on how risky the plan’s assessors deem Brookhart’s property.

“If you live in a place no insurance company wants to insure, in order to make that actuarily sound, it’s going to be a pretty expensive policy,” Amabile said.

Whether on the FAIR plan or not, all Coloradans’ insurance might be getting a whole lot more expensive pretty soon.

“Many times when I talk to people in Colorado, it’s not that they can’t find insurance, it’s that they just don’t want to pay the amount that they’re going to have to pay for having a high-risk property,” said Walker of the Rocky Mountain Insurance Association.

“Unfortunately, it’s about the new normal we’re in, and what does it cost to live with risk.”