California bars insurance cancellations for 750,000 fire victims

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(Bloomberg) –California ordered home insurers to maintain coverage during the next year for 750,000 customers in four counties ravaged by wildfires that are still burning east of Los Angeles.

The moratorium blocks insurers from canceling or not renewing policies in areas affected by the Line, Airport and Bridge fires, the California Department of Insurance said Thursday. The protection covers policyholders regardless of whether their homes burned down. 

The freeze on cancellations takes effect retroactively from the day last week when Governor Gavin Newsom declared a state of emergency in the region. Insurance Commissioner Ricardo Lara can block companies from denying coverage because of a 2018 law designed to provide temporary disaster relief to wildfire victims. Almost one million policies have been placed under moratorium this year alone, according to the insurance department.

“Wildfire survivors should not have to worry about insurance while they are recovering,” Lara said in a statement.

Read more: California Last-Resort Insurer Unprepared for Big Disaster

Strengthened by hot and windy weather, the three fires in Orange, Riverside, Los Angeles, and San Bernardino counties have scorched more than 117,000 acres (47,348 hectares). They’ve prompted widespread evacuations, injured at least two dozen people and destroyed about 200 structures. 

California has deployed National Guard members and secured federal assistance to help fight the blazes, which are still only partially contained.

The threat of wildfires has upended the insurance market in recent years, with companies such as State Farm, Allstate, and USAA cutting back on coverage. Premiums have spiked for many property owners while others have struggled to find coverage at all. That’s resulted in a rapid growth of the state’s last-resort insurer, the FAIR plan.

Lara is pushing a regulatory overhaul meant to stabilize the market and encourage insurers to resume writing policies. The new rules, which would allow insurance companies to use forward-looking climate change models to set rates and factor in the cost of reinsurance, are expected to go into effect by the end of the year.