Op-Ed: Why California needs to buy wildfire insurance

Destruction from California wildfire
SB 290 would authorize California’s governor to purchase insurance that would help limit costs from wildfires and other natural disasters.
(Josh Edelson / AFP/Getty Images)

The one small saving grace over these last two years of horrendous wildfires in California was that they came at a time when the state had ample resources to respond without having to divert money from schools or healthcare.

That won’t always be the case.

As a result of climate change, we can expect catastrophic fires to occur with grim regularity. We also know that state budget surpluses will come and go.

The annual cost of fighting wildfires is as unpredictable as the fierce winds that drive those fires. In each of the last two years, the state has spent nearly $1 billion on catastrophic-wildfire suppression. In each case, that was more than double the amount that had been budgeted.

Fortunately, the state had the cash on hand to cover the difference. But even if it didn’t, the money would still have to be spent.

No expense can be spared in deploying firefighters and equipment to do whatever it takes to protect lives and property. And the firefighters themselves must be protected and provided for as they face tremendous dangers in these battles. The cost must be borne, and the bills must be paid.


This month, Gov. Gavin Newsom and the Legislature swiftly approved a comprehensive response to protecting the state and taxpayers from utility-caused wildfires, which have become increasingly destructive.

But still more needs to be done to protect taxpayers from all other causes of catastrophic wildfires and to ensure that those on the front lines of these wildfires have all the tools they need to both succeed and survive.

That’s why it’s critical that the state government explore ways to transfer the financial risk of another catastrophic wildfire season away from taxpayers and ratepayers. Legislators, including state Sen. Bill Dodd (D-Napa), as well as Treasurer Fiona Ma, have lined up behind Senate Bill 290, which would allow California to do just that.

The idea is one that should make sense to every homeowner and business in California, because it’s something they do routinely to reduce their financial exposure to catastrophic loss: obtain disaster insurance.

The bill would authorize the governor to purchase insurance to help limit the costs incurred by the state in response to wildfires or other natural disasters. Although California has never done this, it is an established business practice for other government agencies. The Federal Emergency Management Agency, for instance, purchases reinsurance policies to protect against having its emergency flood funds depleted during a major event.

Closer to home, the state of Oregon has been purchasing wildfire insurance for decades, and over 40 years has received $102 million in claims while paying $61 million in premiums.

Some models suggest that if California had such insurance policies in place, it would have saved nearly $600 million over the last two years. Such savings would allow the state to spend more on wildfire suppression and mitigation measures that could better protect Californians against worse catastrophes in the future.

For example, the money saved could be used to pay for more fire engines so firefighters could respond to fires faster. The state could also bring on additional firefighting personnel, expand defensible spaces around high-risk communities and ramp up forest management activities that are currently treating just 20% of the land that ideally should be treated each year.

A study by the National Institute of Building Sciences estimates that for every $1 spent in mitigation activities in “wildland-urban interface” areas, where homes are near land prone to wildfires, $3 in future disaster costs are saved. Buying disaster insurance would also reduce fiscal volatility in the state budget.

We can foresee the growing risks that lie ahead. As the governor’s budget proposal stated, “Weather events are more extreme, winds blow with more intensity for longer durations and humidity levels are lower for longer periods of time.”

One spark can trigger tens of millions of dollars in firefighting costs. California needs to have sensible tools to deal with its financial exposure from ever more frequent and severe wildfires. Disaster insurance for the state should be part of the equation.

Ricardo Lara is the commissioner of the California Department of Insurance. Tim Edwards is president of Cal Fire Firefighters.