State officials promote plan to negotiate coverage
By DON THOMPSON, Associated Press
SACRAMENTO, Calif. (AP) — California should get insurance to help cover taxpayers’ costs in bad wildfire seasons, a solution that could help stem losses as climate change contributes to more destructive blazes, two state officials said Thursday.
The most populous state should follow the lead of Oregon, the World Bank and the Federal Emergency Management Agency after outspending its emergency fund in seven of the last 10 years, California Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma said.
California spent nearly $950 million two years ago, about $450 million more than was budgeted and by far the highest annual amount. It spent about $677 million last year, as wildfires again swept through cities, suburbs and more rural areas.
California has experienced 11 of the top 20 most destructive fires in its history since 2007.
The two statewide officeholders teamed with Democratic state Sen. Bill Dodd of Napa to propose that California lawmakers allow the governor, treasurer and insurance commissioner to negotiate insurance coverage with private providers, instead of self-insuring.
“It works just like your home insurance, but for our actual state,” Lara told reporters. If the premiums, terms and coverage aren’t favorable, he said the state can walk away.
The gamble paid off for Oregon, he said, where the state paid $61 million in premiums over nearly 40 years but recouped $102 million in insurance payments.
FEMA began buying $1 billion in flood insurance in 2017, Lara said, with a payout triggered by $4 billion in losses. The government received the full benefits in 2018.
Buying insurance is part of an urgent larger discussion on how California can better respond to wildfires worsening with climate change, Lara said. The state also is considering taking out bonds to pay for wildfire costs to lessen the growing effect on the budget, he said.
The state’s private insurance potentially could be used for other disasters like earthquakes and tsunamis, depending how it’s written, Dodd said. He represents the wine country area hit hard by wildfires two years ago.
A fire last year became the nation’s deadliest in a century and leveled the town of Paradise, where Gov. Gavin Newsom spent Thursday touting two new laws providing emergency funding to fire-hit local governments.
State officials also are seeking ways to encourage private insurance coverage for residents of fire-prone areas who may be uninsurable now, Lara said. That could include unspecified new insurance products, “something that’s unique to California,” the insurance commissioner said.
Premiums could drop as the state does more to thin tangled forests and utilities work to keep their equipment from sparking wildfires , Dodd said.
The Howard Jarvis Taxpayers Association said taxpayers should not be put in the position of subsidizing insurance costs for residents who choose to live in dangerous areas.
“If it’s not putting taxpayers at risk and it’s a way to spread the risk, it might make sense, but we’d have to see the details,” group president Jon Coupal said.
Ma, the treasurer, said in a statement that insurance would make wildfire costs more predictable, help stabilize the budget and protect other spending needs. She missed the news conference while flying back from Washington, D.C., where she had been testifying about allowing banks to service the legal marijuana industry.
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