Insurance groups urge passage of forest management bill  January 21st 2025

Insurance groups urge passage of forest management bill

Several major insurance trade associations wrote to lawmakers Friday urging them to pass the Fix Our Forests Act, which includes various provisions intended to prevent wildfires and was reintroduced to the U.S. House of Representatives Thursday.

H.R. 8790, which is opposed by environmental groups, was passed by the House last year but failed to progress in the Senate.

It is cosponsored by Republican Rep. Bruce Westerman of Arkansas, chair of the House Natural Resources Committee, and Democratic Rep. Scott Peters of California.

In a letter of support, the American Property Casualty Insurance Association, Independent Insurance Agents & Brokers of America, National Association of Mutual Insurance Companies and Reinsurance Association of America said in a joint statement that the measure would increase the United States’ resilience to wildfires, improve land use planning and forest management, and protect wildfire-prone communities.

The legislation proposes, among other things, designating fireshed management areas to prioritize forest management, establishing a “Fireshed Center” to encourage collaboration between federal departments and others, allowing targeted grazing on federal land, and implementing measures to reduce litigation that delays forest management projects.

“We strongly support provisions to reduce the fuel loads in our nation’s forests, to harden utility infrastructure and improve rights-of-way against wildfire by encouraging more active management and removal of hazardous trees, as well as fostering new markets for innovative new products that could facilitate the reduction and utilization of fine fuels,” the insurance groups wrote.

State Farm won’t drop coverage of LA County wildfire victims

In the wake of California’s largest ever wildfire event, the insurer decided to change course on policy renewals.

In wake of the deadly wildfires impacting Southern California, State Farm is pausing non-renewals for homeowners, rental dwelling and residential community association policies in Los Angeles County.

The decision, effective as of Jan. 7, 2024, comes after the state’s largest insurance company announced in March 2024 that it would withdraw coverage of 72,000 home and apartment policies — citing inflation, regulatory costs and rising catastrophe risk for the move.

“We are focused on our customers and helping them recover from the largest fire event we have ever experienced in the state,” State Farm said in a statement sent to PropertyCasualty360.com. “Our claims force is the largest in the industry and we are bringing the full scale and force of our catastrophe response teams to help customers recover – whether they are on the ground in LA or across the country. As of Jan. 17, we’ve received over 8,300 home and auto claims and have already put well over $50 Million back into customers’ hands."

State Farm insures 250,000 homes and 880,000 automobiles in LA County. The company insures over one million homes and more than four million autos across the state.

LA wildfires thrust insurance startup into spotlight as property owners scramble for protection

Midway through December, tech entrepreneur Dan Preston debuted insurance startup Stand's first product focused on protecting property in wildfire zones. He should have had months to work with prospective customers and to market the offering before any catastrophic fires hit the U.S.

In California, Stand's home state, fire season normally lasts from early summer through October or November. Stand, which Preston co-founded early last year, announced a $30 million financing round and the new product on Dec. 16, a few days before the official start of winter.

But it's been a winter like no other. Three weeks after Stand's launch, wildfires ravaged parts of Los Angeles, killing more than two-dozen people, scorching about 41,000 acres due to extreme winds and destroying at least 12,300 structures.

"This is certainly not a time you would normally see events like this," Preston said in an interview this week. "It has put an accelerant on business in a pretty massive way. As soon as this stuff started happening, the inbound demand was about 5-10x overnight."

Preston has been trying to innovate within the typically boring and slow-moving insurance industry for well over a decade. In 2013, he became technology chief at auto insurance upstart Metromile, and later took on the role of CEO, guiding the company into the public market in 2020 through a special purpose acquisition company (SPAC). Metromile hit a rough patch after its SPAC and sold to tech-powered insurer Lemonade in 2022. Preston stayed on at Lemonade for another year.

State Farm pulls Super Bowl ad due to California fires

Insurance giant State Farm has canceled a Super Bowl ad that was set to air during the big game in February, in part, it said, over the raging wildfires in California.

“Our focus is firmly on providing support to the people of Los Angeles. We will not be advertising during the game as originally planned,” a spokesperson said in an emailed statement to The Hill on Friday.

The insurance company said it is serving over 8 million customers in California and added that its agents and other employees “are all focused on helping customers impacted by the Southern California wildfires in the midst of this tragedy.”

In 2022, the average cost of the Super Bowl LVI 30-second commercial was $6.5 million, according to a 2024 report from market research firm Kantar. The cost for those ads in 2024 was reaching $7 million.

State Farm said in the statement it has received more than 8,300 home and auto claims related to the Los Angeles fires and has “put well over $50 Million back into customers’ hands.”

Mercury yet to decide if LA wildfires a single event as claims paid hit $80m

Mercury General Corporation has paid $80 million to policyholders, mainly for living expenses and housing contents due to the Southern California wildfires. However, it has reportedly not yet decided whether it will treat the fires as two separate events under its reinsurance agreements.

Earlier this month, Mercury General provided a preliminary assessment of the wildfires, expecting losses to exceed its reinsurance retention level of $150 million.

In a new update today, the firm stated that it has already paid $80 million to policyholders primarily for living expenses and housing contents, and has started to pay out dwelling claims at the Coverage A limit for verified total losses.

At the same time, Mercury General said it has sufficient liquidity to meet the increased levels of payments, and that its catastrophe reinsurance treaty allows for the combining of events that occur within a 150-mile radius as a single occurrence.

“If each individual event is classified as its own catastrophic event by the Property Claims Service (PCS), a unit of the Insurance Services Office, each event can be considered a separate occurrence. In the case of the Palisades and Eaton wildfires, the PCS has designated each as a separate event,” the firm explained.

Mercury General also observed that as more information becomes available to it, including regarding any subrogation potential, the firm will evaluate whether it will consider the Wildfires as two separate events.

Under a two-event scenario, Mercury General suggested that it may elect to use reinsurance limits of up to $1,290 million for the first event and reinstated limits up to $1,238 million for the second event.

In this scenario, the Company would be responsible for the first and second event retentions of $150 million each, and up to a $101 million reinstatement premium for total retention and reinstatement premiums of $401 million. In addition, the Company would have co-participation up to $52 million for losses in excess of $650 million on the second event,” Mercury General said.

LA wildfires: 17,027 structures damaged or destroyed. Insured loss estimates avg $32.5bn

According to the latest official data from California fire authorities, the wildfires in the Los Angeles region have damaged or destroyed 17,027 structures so far, while the early insurance industry loss estimates from risk modellers average $32.5 billion.

Which would suggest an average insurance claim of around $1.9 million, although this would not leave any allowance for other claims vectors such as business interruption.

Analysts at investment bank Peel Hunt noted this morning that, “There is a risk that insured losses will increase further as the two main fires (Palisades and Eaton) are still not fully contained.”

With new red flag warnings for dangerous or extreme fire weather in place for the next few days, with officials cautioning of the risk of fires growing, there is a chance the damage increases further from these still burning fires.

It’s also worth noting that official data that now states 17,027 structures were damaged or destroyed by these two wildfires may rise whether the burns worsen or not, as the analysis of impacts continues at this time.

“It is still unclear what proportion of insured losses will be retained by insurers in the admitted market, how much exposure has been transferred to the E&S market in the past few years, and what will be picked up by the reinsurance industry,” Peel Hunt’s analyst team said.