California’s latest destructive wildfires dim the future of its people and businesses

05 December 2018

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USA – Burned up on both ends, California’s residents are recovering from the most destructive wildfire in the state’s history, which engulfed Butte County in northern California and was finally contained on November 26, as well as the Woolsey fire that leveled homes in Los Angeles and Ventura Counties.

The latest loss estimate analysis from CoreLogic as of November 27 revealed that the Camp and Woolsey wildfires together could end up costing between $15 billion and $19 billion in residential and commercial losses, with the Camp Fire responsible for the lion’s share of the bill, ranging between $11 billion and $13 billion in total losses alone, along with destroying close to 19,000 structures and leading to 84 deaths, according to the California Department of Forestry and Fire Protection.

“We’re seeing higher loss amounts than last year in the Santa Rosa fires,” said James Gream, chief operating officer of Crawford & Company’s Catastrophe Services, adding that the team had about 1,000 adjusters on standby and deployed rapid response teams to the affected areas during the catastrophe. Crawford’s CAT adjuster portal, RENOVO, launched earlier this year, came in especially handy as it allowed adjusters to receive their assignments using the application and get to staging locations faster, versus waiting for the Crawford team to speak with each adjuster individually.

“The timeliness is of the utmost importance nowadays, so we’re leveraging technology to help us with not just wildfires – if you think about the catastrophe activity over the past couple of years, it’s important that your communication is key, that our response time is above average and that’s what that tool allows us to do,” explained Gream.

California’s wildfire conundrum is only likely to get worse as the drying effects of climate change result in the perfect kindling each season, prompting serious considerations about where we should be living.

“We’re experiencing another very dry climate these past few months. There’s very little moisture in the air, and so combined with the seasonal winds that we get this time of year, the fires seem to be getting larger and spread faster than before,” said Martha Bane, managing director of Gallagher‘s property practice. “As we saw in many of the events last year, including the hurricanes, it can take over a year for businesses to get back up after a major disaster, and we’re still actually adjusting those losses from last year’s events. I think what’s on people’s minds right now is, do we keep continuing to rebuild in these areas that are becoming more and more susceptible to wildfires as we’ve encroached on these areas that weren’t previously built in before?”

In Malibu, where many high-value homes were flattened during the Woolsey fire, it’s unlikely that people won’t want to rebuild, particularly since those with greater means have a better chance of getting back on their feet faster following these kind of catastrophes, explained Bane. However, with the encouragement of their agents and brokers, all insureds should be thinking about using better fire-resistant materials during rebuilding and implementing wildfire mitigation efforts, such as trimming vegetation and creating barriers around properties, in addition to having coverage if they have to evacuate and relocate temporarily until their home is rebuilt.

While commercial losses accounted for only around $3.5 billion to $4.5 billion of the total loss according to estimates from CoreLogic, one sector that could be shaking in its boots as wildfires worsen is the cannabis industry. In 2017, the California Growers Association reported that 30% to 40% of the state’s marijuana growers could have been impacted in some way by that year’s wildfires. This year’s devastation likely wasn’t as bad, one expert told Insurance Business, but that doesn’t mean the industry is in the clear.

“A lot of the legitimate growing business seems to be moving south of San Francisco where they used to grow artichokes and all sorts of things down in the Salinas area – a lot of that is turning into cannabis, where it’s flatter ground than up in the Emerald Triangle,” said Susan Preston, president of the Professional Program Insurance Brokerage (PPIB). “[What’s] going on in California is that it has taken forever for the state to get the cannabis recreational business up and running, and in the meantime, they’ve pretty much required that anybody, including medicinal businesses, have a license. The upshot of it is that everything has taken much longer to get our businesses legitimized under the new recreational laws, so that there’s very few that have gotten licensed as of yet and when the fires came through, there were an awful lot of people [during] this year’s fires and last year’s fires who did not have insurance.”

Down the line, it could be even more difficult to convince the industry to insure cannabis operations.

“Insurance is hard enough to get in the cannabis industry and now insurance companies are very nervous about California in general, so it could hamper the growth of the industry out here,” said Preston, though she added, “Whether or not people are going to turn tail and run out of California, I don’t see that happening. I think what will happen is there has been a lot of illegal growing in California, and I think people are going to have to be out in the open and be in the flat lands if they’re going to have legitimate businesses in California.”

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