What to learn from rebuilding of Paradise after 2018 wildfire? Plenty, says top insurance executive
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The 2018 Camp fire that destroyed most of the town of Paradise caused $12.5 billion in insured damages, making it the costliest wildfire in U.S. history. Now, the multiple Los Angeles County fires are expected to easily surpass that, raising questions about the future availability and affordability of homeowners insurance. Many who had lost homes in the fires had been dropped by their insurers before the disaster struck.
Last month, Mercury Insurance, one of the state’s largest homeowners carriers, offered a glimmer of hope when it said it would start writing new policies in the Sierra Nevada foothills community, still in the early stages of rebuilding with less density under a new building code intended to make it more fire resistant.
Mercury also disclosed that it would have to absorb at least $150 million in losses from the Los Angeles fires, with one analyst this week pegging its losses possibly as high as $1.7 billion.
Nevertheless, Victor Joseph, president of the Los Angeles-based insurer and son of its founder, said the company remains committed to insuring homes in the state. In an interview, he discussed how Paradise’s reconstruction offers lessons for rebuilding after the Palisades and Eaton fires and steps that would make it more likely for insurers to offer policies.
Why would you start writing new policies in Paradise after the huge losses insurers suffered there?
It’s very different, the construction you see there now from how it was before the fires happened. If you go on something like Google Street View, and pull up the images of Paradise, it looks like a completely different city.
Chubb expects that its losses from the L.A. County fires will total $1.5 billion, making the Swiss company the first major insurer to release such a figure.
What are the most important changes in the community?
First you have a kind of broad outlying area — how they’re managing fuel. And what we’ve seen with the science is once you get over 30 feet of separation between structures, you have much less concern about radiant heat as a factor in causing urban conflagrations. Then you have a number of codes and changes that they’ve made within the city. Companies like us put a lot of emphasis on what you have zero to five feet from your home.
People love to have shrubbery and trees near their homes.
They found a few sort of creative workarounds. They have little planters in the front yard or right against the house. And on windy days, what they do is they move them farther away from the home. So they found ways to create sort of this lifestyle or this aesthetic that is really sensitive and savvy as it relates to wildfire. So you don’t have to move towards some barren landscape or moonscape that is unattractive.
How can you get 30 feet of separation between structures?
There were a large chunk of folks who decided not to come back. Some of the folks who stayed ended up buying up lots of land that were near them.
Getting 30 feet of separation from structures might be more challenging in dense communities such as Pacific Palisades and Altadena, even if some residents don’t return.
It’s easier when you’re starting with a blank slate. You don’t want the blank slate to be there in the first place, but unfortunately, now you have two more places in California where that’s the case.
A.B. 238, which would make it easy for victims of the Los Angeles County wildfires to get mortgage relief, will proceed despite voluntary agreements Gov. Newsom reached with hundreds of lenders.
Los Angeles Mayor Karen Bass has ordered building permits to be expedited and Gov. Gavin Newsom has suspended certain elements of the California Environmental Quality Act. Plus, there is a huge need for housing in Los Angeles and the pressure will be on to increase density.
I think people have to maybe pause just for a beat and think about, do you want to build back exactly the same way? Because if you do, we’re going to be having this conversation again in a few decades.
Are there other ways that an urban community could improve its fire resilience short of depopulating and creating large fire breaks between homes?
I do think there are a few developments in Orange County that provide some inspiration on how you can do that well. There’s a famous one called Orchard Hills. When the Silverado fire came [in 2020], that was being blown by some pretty strong winds and they did very well — even though the homes are close together. They designed it with the Orange County Fire Authority to be ready for an ember storm.
So what was done in Orchard Hills?
They designed the terrain around the community, the landscape, in a way where embers would be more likely to fly over the community rather than into it. They’ve designed a wall around the community that is meant to help with embers. All the homes on the outer edge of the community are built to a standard with a real fixation on being a line of defense for ember storms. If that first layer of homes is ignited, you’ve already sort of lost the battle.
As the cleanup phase of recovery begins after the devastating fires in L.A. County, displaced residents grapple with new uncertainty surrounding the cost and timeline for rebuilding.
How do you build homes to a higher standard?
It’s pretty uncommon nowadays to see a roof or siding that you’d be too concerned about. Stucco is very common and that’s fine. So it comes back to that zero-to-five foot space, ember resistant vents with smaller mesh screens, and then if they’ve got a deck or something elevated that’s combustible — or it’s a place where embers can kind of sneak under and gather and ignite — you really need to seal those off.
California’s Fair Plan, the state’s insurer of last resort, may be unable to pay billions in claims arising from the Los Angeles fires and may require a bailout that could ultimately be paid by homeowners statewide.
Well that’s doable.
My hope is that we’ll build back something that maybe takes a few pages out of the book of Paradise, and maybe Orchard Hills and other newer communities.
What do you think is the cause of the destructive fires we have seen in California? Talking climate change can be politically tricky these days.
Well, what I would say is the year 2000 in my mind represents a clear transition in things like vapor pressure deficit, that feeds into vegetation being a lot drier in California. I don’t see any indication that that’s anything other than human-driven climate change. Whether it’s the primary cause [of the fires], I’m not really comfortable saying, but I do think it’s something we certainly feel is a part of the problem.
Unlike some other insurers, Mercury has not made news for non-renewals. In fact, you reached a deal to offer insurance to policyholders of Tokio Marine America and its subsidiary when they exited the state’s homeowners market last year. Why is that?
Most of our business is in California. We don’t have a position that we can take, like other companies, where we just say, “Let’s pause in California. Let’s forget it.” Three-quarters of our employees live here, so one way or another, we’re going to figure this out.
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