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Insurance companies, homeowners strained by growing wildfire risk

Burning pine trees
Eric True
Coconino National Forest
Tunnel Fire

Insurance companies are increasingly feeling the strain of disasters like the Tunnel Fire, which are growing in frequency because of climate change. In the 1970s American insurance companies paid less than $100 million a year toward wildfire losses; now the annual average reaches as high as $13 billion. KNAU’s Melissa Sevigny spoke with Kimiko Barrett of Headwater Economics, a nonprofit group that researches community development, about how insurance is changing with the climate.

We’re seeing increasing numbers of wildfires in the West, especially, and we have events like the Tunnel Fire happening now in Arizona where thirty houses burned down. From the perspective of the insurance company, is it a strain to handle that kind of increasing number of houses that are risk of burning down?

Anecdotally, I think it’s important to think through: insurance coverage for wildfires has historically been quite minimal. The references we have heard is that up until recent years, there have been more claims being submitted for leaky washing machines than for wildfires…. Having said that, recent wildfire events, 2017, 2018, 2020, and 2021, were particularly devastating and the trend is going up. Insurance companies, it’s a lot easier for them, traditionally, to just drop a policy than to work with a homeowner to continue a retainment of that coverage or that policy.

When you talk about insurance companies dropping a policy, do you mean there’s homes in the West now that cannot be insured of wildfire?

Oh, certainly. You’re seeing this most evidenced in California…. So that landscape is starting to evolve as wildfires increase with risk, impact, and structures destroyed. When you look at how many structures destroyed since 2005, we’re reaching into hundreds of thousands at this point. A lot of those unfortunately are in California. But those devastating events happened in recent years, and those trends are going up, and insurance providers know this.

What things are insurance providers doing to try to be flexible to this new future? 

We’re hearing more about homeowners trying to proactively engage with their insurance companies, and vice versa. And so it’s things are there very specific to the home and property itself. We know through science and research that some of these mitigation measures can be quite influential in protecting that home during a wildfire… You have to visualize an ember storm. By that I’m talking about just being showered with tiny, tiny, matchsticks, and thinking through: if any of those matchsticks land on anything, can that lead to a fire? You can take it to the next tier, which is thinking thoughtfully about the building materials within the home itself. At that point we are talking about the roof, the exterior walls, windows, vents, soffeting, things along those lines can all collectively influence survivability of a structure in a wildfire.

All of these things we’re talking about can be quite expensive, especially if you’re living in an older home. Are there programs to help homeowners who are in fire-prone areas?

There are some programs out there, either at a local fire district level or at state level, subsidies and grants. There is certainly an increased role and need for grants and subsidies to homeowners provided from the state and federal level to offset what those costs would be.

We’ve been talking about, in facing this climate-changed future, what homeowners can do and what insurance companies are doing. Are there larger policy solutions that you also advocate for?

Right now, at a policy level, we spend enormous amounts of money, on suppression, which is containing a wildfire and extinguishing it, and on forest treatments, which is reducing fuels in the forest. But a wildfire impacts a community at a community scale, so you need to start investing in the community, so that it’s built to anticipate the wildfire ahead of that occurrence. If we don’t give money to communities to do that, and we continue to spend it only on the forest, we only going to continue to address half of the problem. We call this the wildland-urban interface, and yet we only focus on the wildland. You need to also start thinking about the urban within that context, if you’re ultimately trying to address the wildfire crisis in the West.

Thank you so much for speaking with me, I appreciate it.

Thank you.

Melissa joined KNAU's team in 2015 to report on science, health, and the environment. Her work has appeared nationally on NPR and been featured on Science Friday. She grew up in Tucson, Arizona, where she fell in love with the ecology and geology of the Sonoran desert.