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California Senator Bill Dodd, Insurance Commissioner Ricardo Lara, and Treasurer Fiona Ma have proposed SB 290, which would authorize the governor, insurance commissioner, and treasurer to enter into an insurance policy that pays out when California has unexpected costs for disaster response.

California disaster insurance would function like home insurance, but for the state — allowing the state to pay a premium using a portion of existing emergency funds that would trigger a payment to the state in the event of a disaster.

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'Budget predictability'

“Rising wildfire suppression costs can strain California's financial resources and threaten cuts to critical programs,” said Senator Dodd. “As climate change continues to contribute to devastating infernos, we need a strategy to reduce the pressure on state and community coffers. This bill would do just that, allowing the state to invest in an insurance policy to ensure budget predictability and reduce taxpayers' exposure to increasing costs associated with disasters, especially wildfires.”

“In seven of the last 10 years, our firefighting costs have exceeded our budget projections — by more than $450 million in 2017 alone,” said Commissioner Lara. “California disaster insurance is a better solution that gives taxpayers the benefit of predictable costs, so we can invest in a safer future. As we confront destructive climate-drive events, we need to be open to new models that reduce risk to our communities and budgets. California disaster insurance is our first response.”

“This policy makes annual wildfire suppression costs more predictable, protecting the taxpayers from the volatility that has been seen over the past several years and creating budget stability and preserving other investments,” said Treasurer Ma. “It is time for California to be proactive and not reactive.”

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Reduce risk to taxpayers following disasters

California spent $947 million in 2017-18 through the emergency fund for firefighting — more than $450 million more than budgeted, according to the California Department of Forestry and Fire Protection (Cal Fire). The costs of fighting wildfires have overrun Cal Fire's emergency budget in seven of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history.

The federal government, the World Bank, and the state of Oregon all have used insurance to reduce the risk to taxpayers following disasters.

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Oregon has purchased wildfire insurance for nearly 40 years

Oregon has purchased insurance protection against ever-changing wildfire costs for nearly 40 years — spending $61 million on premiums and receiving $102 million in insurance payments.

California currently pays for wildfire disasters with available funds.

SB 290 must be in print for 30 days before it can be scheduled for a committee hearing.

Steven A. Meyerowitz, Esq., ([email protected]) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc.