Recent wildfires in California have changed how property insurers assess risk. Traditionally, companies looked at factors like ISO Protection Class ratings, wildfire hazard scores, and proximity to fire services to determine if a property was insurable. However, devastating fires have struck areas that were once considered safe, leading to a critical reevaluation of these long-standing criteria.
Jeffrey Benson, Builders Risk Program Leader at Victor Insurance, noted that even regions with excellent Protection Class ratings experienced total losses in recent wildfires. This has raised questions about the effectiveness of existing risk assessments. Brokers are now facing a challenging landscape as they seek insurance options for clients in areas where catastrophic events are becoming more common.
The situation is no longer confined to California. Wildfires are spreading to other states, forcing insurers to tighten their underwriting criteria. Many standard insurers are limiting coverage or withdrawing from high-risk areas altogether. As a result, brokers are increasingly turning to non-admitted excess and surplus lines carriers, often at higher costs and with stricter terms.
Benson explained that understanding ISO Public Protection Classes is crucial. These classes evaluate a community’s fire protection capabilities and range from 1 (best) to 10 (least protected). Properties in classes 1 through 8 usually receive better insurance options, while those in classes 9 and 10 face higher premiums and limited coverage. However, even properties in highly rated areas can suffer significant losses from wildfires.
Brokers are now tasked with looking beyond traditional metrics. They must advise clients on comprehensive risk management strategies that include wildfire hazard scores, terrain, vegetation management, and building materials. This approach is becoming essential, especially as urban development expands into remote and fire-prone areas.
To help address these challenges, Victor Insurance has introduced Builders Risk QuickCover. This tool simplifies the process for securing coverage for residential construction projects valued up to $1.5 million. It allows brokers to quickly quote and bind policies, streamlining the underwriting process while maintaining necessary standards.
Benson emphasized the importance of adapting to new realities. He pointed out that stronger building codes and improved materials can help communities recover from disasters. For instance, the use of fire-resistant construction materials is becoming more common in high-risk areas. While these improvements may increase initial costs, they ultimately make properties more resilient and insurable.
As the insurance landscape evolves, developers are increasingly consulting with brokers early in the planning process. They are considering fire protection infrastructure, such as the location of fire stations and water supply quality, when deciding where and how to build. This shift could significantly impact a project’s insurability.
While the focus remains on recovery from recent fires, the insurance industry is adapting to ensure that people can rebuild. Brokers are stepping into expanded roles as risk managers and educators, helping clients understand their coverage and navigate the complexities of the current market. This evolving landscape highlights the importance of proactive planning and risk management in an age where wildfires are a growing threat.