Months after a catastrophic fire destroyed over 2,200 homes in Hawaii, some property owners are facing another blow: their insurance policies are not being renewed due to their insurers deeming the risk too high. This is a problem occurring nationwide as climate change and urban development increase the likelihood of wildfires and other natural disasters damaging communities. Insurance companies, state regulators, and researchers are grappling with how to maintain insurance availability while ensuring the financial stability of insurers.
Hawaii Insurance Commissioner Gordon Ito stated that most insurers remain committed to the Hawaii market, but some have ceased renewing policies for wood structures in wildfire risk areas due to rising insurance costs, including reinsurance rates. This situation mirrors what happened in Colorado after the 2021 Marshall Fire destroyed 1,100 homes in Boulder County, leading Colorado lawmakers to create the Fair Access to Insurance Requirements (FAIR) Plan, offering basic property insurance coverage for residents who cannot obtain private insurance starting in 2025.
Other states, including California, Louisiana, and Florida, have also established state-affiliated insurers to fill the gap when private insurers withdraw due to natural disaster risks. Researchers suggest that homeowners can mitigate risks by making their properties more fire-resistant, such as using fire-resistant materials for roofs and gutters and maintaining defensible space around homes.
Anne Cope, the chief engineer for the Insurance Institute for Business & Home Safety, demonstrated the effectiveness of these measures by comparing the resilience of a fire-resistant building to a traditional one during a wildfire simulation. The economic impact of catastrophic fires can be long-lasting, with insurers in Hawaii already having paid a substantial portion of claims for personal property, motor vehicles, and commercial losses. However, the fires have also impacted the state's economy, with reduced tax revenue and many displaced residents still living in hotels.
Furthermore, the fires have affected Hawaii's tourism industry, with a projected ongoing revenue reduction of 10% to 15%. Despite these challenges, efforts to prevent and mitigate the effects of wildfires can make a significant difference. By implementing fire-resistant measures and supporting affected communities, stakeholders can work towards reducing the impact of wildfires on both lives and livelihoods.