Insurance expert: Rising wildfire risk drives coverage crisis in Washington

By MIKE MALTAIS
Ward Media Staff Reporter

CHELAN – As wildfire risk accelerates, homeowners’ insurance costs rise, and coverage becomes increasingly difficult to acquire and keep, the Chelan Fire and Rescue Board of Commissioners invited an insurance specialist to address their Oct. 21 meeting on wildfires and insurance.

Kenton Brine is president of the Seattle-based NW Insurance Council, described on its website, (nwinsurance.org) as a non-profit, member-supported trade association. 

“We provide information about home, auto, and business insurance to consumers, policymakers, and the media in Washington, Oregon, and Idaho,” said Brine. 

He explained what homeowner’s and renters’ insurance cover in terms of damage, losses, and liabilities and, equally important, what they do not cover:

• Flooding outside the home.
• Earthquakes.
• Earth movements (landslides, mudflows, and sinkholes).

Brine said his specialty is property and casualty (P&C) insurance related to homes and that changes are needed to protect homeowners and stabilize the insurance market.

The big three elements of providing and servicing P&C policies are: 

Underwriting – deciding who to write coverage for and what will be covered.

Rating – what the policy will cost.

Claims – Rebuilding and replacing a covered loss after it occurs.

In the case of wildfire risk, some considerations include

• Assessment of building materials.
• Fuel load on or near the property.
• Ability to access or leave a property in case of emergency.
• Distance from and condition of fire services.
• Defensible space/home hardening. 

“Insurers are tightening underwriting standards to respond to rising risks,” said Brine. “Some are nonrenewing. Others have stopped writing new policies.”

Some homeowners with diminishing options are reaching out to the Washington FAIR Plan, which provides basic property insurance to applicants who have difficulty getting a policy in the standard market. 

“That may not be enough to cover the full cost of a home destroyed by a fire,” Brine said.

“Consumers facing the current marketplace may think insurers are looking for ways not to insure things,” said Brine. “Insurers need to insure things to remain in business, so they are trying to better predict the risk of loss.”

Brine noted that wind and hail account for nearly 98 percent of homeowner claims, but fire and lightning are by far the most expensive.

“Whether we want to believe in climate change as a scientific fact or what causes it, what is undeniable is the fact that the costs related to storms have gone up dramatically,” Brine said.

Some examples:

• In the 1980’s 33 events averaged 3.3 per year for average losses of $22 billion per year.
• 1990’s – 57 events @ 5.7/year, average losses $33 billion/year.
• 2000’s – 67events @ 6.7/year, average losses $61 billion/year.
• 2010’s – 131 events @ 13.1/year, average losses $99 billion/year.
• Last five years (2018-2023) 20/year, average losses of $123 billion/year.
• 2023 alone, 28 events, $95 billion in losses.
• 2024 Hurricanes Helene & Milton $44 billion in insured losses to date.

“We are building more homes in harm’s way,” said Brine. “Between 1900 and 1959, only 14 percent of new homes built in the U.S. faced significant wildfire threats. Today within two years, 55 percent of new homes built were facing the threat of wildfires.”

Washington is one of five states where most of the population growth has occurred in the last two years.

“A lot of people are saying we have an insurance crisis,” said Brine. “What we actually have is a climate/disaster crisis and a growth in population and building crisis. Insurers are left to be the zoning police of last resort.”

After reviewing the current dynamics facing both insurers and buyers, Brine turned to steps being taken to address the new normal in the market and the changes needed to protect homeowners and stabilize the insurance market. Those include legislation for consumers and advancements in wildfire and homebuilding science.

• Home hardening rebates. Washington is the only state in the country that prohibits insurers from offering discounts or rebates for home hardening and defensible space – including for Firewise communities. Insurers support legislation to remove this barrier.

Commissioner Russ Jones said he asked the Office of the Insurance Commissioner (OIC) which state code was preventing the rebates or discounts. While the reply he received indicated discounts are allowed, “It would be extremely difficult for the insurance company to comply with all the steps involved,” Jones said and asked Brine if he sees any changes ahead.

Bride said he has spoken with both candidates for insurance commissioner.

“Both candidates are very interested in being a lot more proactive about trying to engage and promote home hardening and defensible space,” said Brine. “I think everything is back on the table when we have a new insurance commission.”

• Mitigation grants. A mitigation grant program to offer financial assistance for homeowners to help them afford the costs of fire hardening homes and creating defensible space for community level resilience.
• Forest health investment. Insurers supported legislation that funded a $50 million state investment over 10 years for forest thinning and prescribed burning and assistance to property owners with fire prevention measures.
• IBHS Wildfire Prepared Home. The Insurance Institute for Business & Home Safety (IBHS) developed the Wildfire Prepared Home based on years of research in fire combustion science. The certification requires the use of fire-resistant materials and building methods in new construction. These standards are being adopted for state building codes across the West.

Brine said he recently spoke with IBHS and it is in the process of rolling out a program in Washington, but the implementation process will take time.

• Community resilience. Insurers work with stakeholders from forest managers to firefighters to develop community wide construction standards to slow the spread of wildfires and reduce loss of lives and property.

Commissioner Mark Donnell asked if Brine sees a benefit in trying to engage the major players together – elected officials, OIC, insurers, fire chiefs and commissioners, Brine’s group – in a conversation to improve the situation.

Brine agreed and said he sits on a 35-member panel in Oregon to discuss sustainable wildfire mitigation and suppression funding.

“These things are happening on a large scale with large groups of people,” said Brine. “They have to trickle down to community-level discussions.”

Brine said there needs to be greater understanding and communication on the local level to help homeowners understand what the market is facing and for insurers to understand the impact their decisions are having on homeowners.

Jones noted that when an insurance company chooses not to renew a homeowner policy the company must give a reason.

“We’ve had cases where homes well away from the urban interface in downtown Chelan have not been renewed and given wildfire risk as a reason,” said Jones. “What course of action do those homeowners have?”

“Right now, their options are pretty limited,” said Brine. “They just have to shop for another insurer.”

Brine said that frustration has been shared with legislators in various parts of the state.

“I would not be surprised if we don’t see some legislation in Washington to require insurers to provide a bit more information,” said Brine. “That said, it does not change the outcome for the insured.”

Brine said the policyholder can ask to see the information used as a basis for the nonrenewal to make sure it is accurate or not outdated.

Jones asked what legislative measures the fire chiefs/commissioners’ associations can pursue.

“Things we are currently on record in support of our mitigation grants and the establishment of a standard for building and retrofitting structures and property,” said Brine, “Wildfire prepared homes, community-level resilience, and state dollars for the purpose of providing grants to people of some kind of needs basis,”

“The easiest thing to get done with insurer industry support is risk mitigation and mitigation grants,” said Brine. “That’s the future of living with wildfire, and we’re supportive of that.”

Mike Maltais: 360-333-8483 or michael@ward.media