Oct 5, 2023 - News

Wildfires threaten San Diego's insurance premiums

Share of properties at risk of an insurance rate increase or non-renewal, 2023
Data: SmokyMountains.com; Map: Simran Parwani/Axios

Nearly 750,000 properties in the San Diego metro area are facing higher insurance premiums or policy non-renewals this year due to the threat of extreme weather.

Driving the news: More than 10% of local properties are at risk because of wildfires and about 4% due to flooding, according to a new analysis by climate data nonprofit First Street.

  • Across California, more than a quarter of properties are seeing insurance rates rise because of wildfires or flooding.

Why it matters: Insurers are changing how they factor climate and extreme weather risks into premiums. Others are suspending coverage altogether, Axios' Brianna Crane and Kavya Beheraj report.

What's happening: When it comes to wildfire and wind damage, some private insurers are dropping policyholders as the risk of those threats grows, says Jeremy Porter, First Street's head of climate implications research.

  • That's leading many homeowners to opt for public "insurer of last resort" plans — but often at higher rates.

California state law, for example, prevents private insurers from raising rates more than 7% a year, but public plans have no such cap.

  • Some Californians have gone from paying $1,500 annually for their private plan to $6,000-plus for a public plan.
  • Of note: California leaders announced a plan last week to lure insurers back to the state by deciding on rate hike requests at a faster clip.

Meanwhile, FEMA recently updated its flood insurance pricing model for the first time since the 1970s, leading to higher premiums that are more reflective of today's flooding risks, Porter says.

  • The intrigue: 8 million households are in FEMA flood zones, but only 4.7 million have active flood insurance policies.

Zoom in: In San Diego, strong and unpredictable wildfires present the biggest safety concern for home buyers, and make it more difficult to get homeowners insurance, Frank Powell, president of the Greater San Diego Association of Realtors, previously told Axios.

  • The problem is much of San Diego County is in a fire hazard zone, and susceptible to earthquakes, tsunamis and flooding, he noted.

State of play: Climate and extreme weather risks are a major worry for people buying homes in California, especially with recent wildfires, heat waves and hurricanes.

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