Wildfire Risk and the Problem of Insurability: A Case by Matthew Auer

This chapter examines the policy problem of securing and maintaining property insurance amid catastrophic wildfire risk in the United States. Uncontrolled and destructive wildfire is an increasingly familiar spring-through-autumn phenomenon in the American West. But the expansive fire season of 2023, alone, reminded Americans that unplanned and hard-to-suppress fire can happen in forested areas, shrubland, and grassland just about anywhere on the continent. In early June, 2023, New York City earned the dubious distinction of the world’s worst air quality as smoke from massive forest fires in Nova Scotia drifted south. All 13 of Canada’s provinces grappled with unmanaged wildfires in that nation’s worst fire season on record. A fast-moving, deadly wildfire swept through—and largely destroyed—the city of Lāhainā, Hawai’i in August of 2023, taking 115 lives with many dozens still missing at the time of this writing. That same month, more than 350 wildfires burned across the state of Louisiana. The perils of catastrophic wildfireWildfires are not lost on the insurance industry. Much as insurance companies have left Florida to avoid hurricane riskRisks exposure, the industry has grown increasingly skittish about wildfire-prone California. In 2023, two of the largest insurance carriers in California announced they would no longer write new policies for homeowners. Two other carriers declared they were non-renewing existing policies and exiting California, entirely. With climate changeChange and the continued expansion of homes and subdivisions in the wildland–urban interface, the riskRisks of property destruction, loss of life, and environmental damage will mount in the decades ahead, threatening the human dignity of everyone in harm’s way, especially low-income and disadvantaged homeowners, renters, and the uninsured. This chapter considers wildfireWildfires riskRisks and insurance insecurity using the decision processDecision process tool. I focus on risksRisks as well as resilience measures for low-income households in the largest insurance marketMarkets in the United States: the state of California. Understanding who is at riskRisks and how to address their needs is an undertaking for a broad set of actors, including vulnerable communities, insurance companies, and public agencies at all levels—from local to federal. This chapter concludes with thoughts about potential alternativeAlternative solutions for future inquiry.