As we head into October, thoughts turn to another anniversary of the Berkeley Hills firestorm of 1991. Did you know that another conflagration consumed over 584 homes in the Berkeley Hills during a blaze that started on September 17, 1923 and originated in Wildcat Canyon?
Both fires caused the City of Berkeley and local homeowners to look at ways to mitigate the issues that caused the destruction such as shake roofs and overgrown foliage close to the structures. The City of Berkeley sets requirements and restrictions for homes in the fire zone. However, with limited enforcement and an unthinned canopy of trees, the insurance agencies that provide the funding when disaster strikes in the Berkeley hills, are deciding they have had enough.
With numerous threats including climate change, forest management, housing encroaching on forests, and missteps by PG&E being blamed for wildfires that scorched over a hundred thousand acres in California in recent years, and completely destroyed the town of Paradise last fall, the risk is getting too high for some insurance companies. Companies such as Allstate, recently sent letters to their policyholders alerting them that they will not be renewing their fire insurance policies due to “the catastrophic wildfire seasons forcing them to make decisions about managing their exposure to wildfire risk”.
According to a recent article in Berkeleyside, there are several known people in the Berkeley Hills whose homeowners’ policies have not been renewed this year, or who have been denied new coverage, because of fire risk. Their experiences show an alarming statewide issue, with insurance companies gasping from billions of dollars in claims resulting from the firestorms that have emerged time and time again from one end of California to another. The last two years have been record fire years with 2017 resulting in $11.8 billion in Northern California insurance losses and $12.4 billion in 2018.
Interesting to note that many of the same conditions that made the 1991 Berkeley Hills firestorm so devastating still exist. These include non-native plants, such as Eucalyptus, tight, windy roads (which caused fire trucks to get stuck or delayed above Claremont which hurt firefighting efforts), and vegetation-which is a blessing and the curse of the Grizzly Peak/Skyline/Fish Ranch corridor.
East Bay Realtors discussing the looming insurance availability crisis are worried about the impact on local homeowners. “Rates have increased significantly during the past 28 years since the last major fire. This has led some long-time homeowners, some of whom are on fixed incomes, to consider selling or down-sizing. Rising costs and/or the inability to obtain fire insurance will also have an impact on the ability to close escrow on homes when buyers are not properly prepared. We are telling our clients to investigate insurance upfront and before removing any contingencies. So far, home values in the hills remain solid, despite the insurance news. People still value the tranquility of the hills, the views, and the lushness of the trees. The houses in the fire area tend to be more spacious than the flats and the price per square foot is lower making a bigger home more affordable. We hope these things that make hill homes a deal will continue to help offset the cost of higher insurance rates for our buyers and investors.” stated Tracy Sichterman, Broker/Owner, Berkeley Hills Realty.
The California Department of Insurance released new data showing a 6% increase from 2017 to 2018 in insurer-initiated non-renewals of homeowners’ policies in areas where Cal Fire is the primary agency. During the same period, there was a 10% increase in those non-renewals in the zip codes affected by the major wildfires from 2015 to 2017 — and that data does not yet include any effects of the catastrophic blazes at the end of 2018.
Ruth Stroup, a longtime Farmers Insurance agent, said, “The insurance carriers started paying attention to wildfire risk during the drought, and many stopped issuing new policies in the East Bay Hills. We also saw some companies restricting their underwriting rules and increasing rates (adding risk surcharges) at renewal. Since the Paradise Fire, we’ve seen dramatic changes in underwriting rules in both the preferred and surplus lines market. The good news is that there are some new programs to help fill in the gaps. As a Farmers agent, I have access to several programs to help my clients find an insurance policy to protect their home.”
What can Berkeley Hills homeowners do?
- Pay premiums on time: Don’t give insurance companies an easy out to cancel your policy.
- Avoid making small claims: Excessive claims are another reason insurance companies can non-renew your coverage
- Read the fine print of your policy: Review your coverage, including endorsements, to make sure you are fully covered. Pay special attention to “Extended Replacement cost” and “Building Code” as these line items can make a big difference in the quality of your policy.
- Research the FAIR Plan (California Fair Access to Insurance Requirements (FAIR) Plan): https://www.cfpnet.com The FAIR Plan provides insurance as a last resort and should be used only after a diligent effort to obtain coverage in the voluntary market has been made.
- Continue to practice wildfire mitigation: Some insurers will take into consideration the work you have done around your home to stave off wildfire damage. Although computer algorithms are used to portray the risk of an entire neighborhood, you may be able to get assessed by an adjuster.
- Investigate before you buy: Call an insurance agent before you remove your contingencies on a home and investigate the ability to obtain and costs related to a new policy. Note: the estimate your lender has given you for insurance costs, may not adequately reflect today’s changing fire insurance rates.
Berkeley Hills Realty is working to stay abreast of this situation and will offer resources and information as it becomes available in future blog posts.
For more information about the numbers behind California wildfires, visit the Cal Fire webpage; https://www.iii.org/fact-statistic/facts-statistics-wildfires