More Regulations Not The Answer To Wildfire Risks

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It doesn⁘t take a climate scientist to tell you that wildfires are wreaking havoc on large swaths of the country. Propelled by a warming climate, poor forest management practices, a lack of adequate risk mitigation strategies, and questionable decision-making by some Americans who choose to move to fire-prone locations, wildfires cause an enormous amount of property damage yearly. The way to address this problem is not by introducing more rules and regulations but by allowing insurance prices to reflect risk adequately. According to the National Interagency Coordination Center, in 2023, U.S. wildfires scorched nearly 2,700,000 acres nationally and destroyed 4,312 structures ⁘ 3,060 of which were private residences. This property damage, which the National Oceanic and Atmospheric Administration estimates totaled $9 billion, puts an undue burden on the property and casualty insurance market.

In most cases, property insurance covers fire damage, including wildfires. Insurers in many states have been forced to raise insurance rates, limit or pause writing new policies, and, in extreme circumstances, pull out of the market to compensate for growing losses. These developments have spurred policymakers at all levels of government to propose a wide range of legislative and regulatory solutions to reduce rates and stabilize the insurance market. The problem is that many of these solutions are uniquely bad and can have severe consequences for consumers.

Some state regulators have piled more onerous regulations onto insurers. A new state plan in California will require insurers to write more policies and expand coverage into more fire-prone locations. Ironically, plans like California⁘s tend to add to the financial burden insurers already feel from existing regulations and do nothing to reduce homeowners⁘ exposure to wildfires, reduce property losses and keep insurers in the state.

One noteworthy example is Rep. Adam Schiff, D-Calif., and his legislative proposal, Incorporating National Support for Unprecedented Risks and Emergencies Act (INSURE). First proposed in January, this act would create a federal reinsurance mechanism to cover ⁘an array of cat perils, including wind, wildfire, severe convective storms, flood and earthquake.⁘