Risk Meter assigns scores ranging from 0 to 100. With a few exceptions, a score of 0 to 30 is acceptable to most all California admitted preferred carriers. A score of 31 to 40 is the range which triggers some carriers start to decline coverage. Scores of 41 to 50 start becoming problematic for most carriers but some locations are still acceptable. Under current market conditions scores of 51 to 60 are ineligible for California admitted preferred carriers. Exceptions are much rarer.
Below is an example of a Risk Meter color coded graph. This location is a great example because it has all the color shadings and scores. This location was assigned a score of 49. Some Board members have forcefully stated, “We are in the green; we are in the green!” Unfortunately, this location is located in a wind driven ember zone less than one mile from risk scores of 51 to 60; 61 to 80 and 81 to 100. Fire officials have found that wildfire embers can fly up to a mile and start a new fire.
hypothesis, it is believed that wildfires the last seven or more years have not had much impact on condominiums. However, that is not how the insurance industry works or is impacted nationwide by multiple catastrophes. Homeowners and associations may want agents to quote property limits of $10 to $100 million for lower premiums when one singular fire event could end up costing insurers tens of millions of dollars.
Here is an example of the experience a higher risk community might have during the insurance quote process. For this example, two agents in the marketplace should be sufficient to cover all markets. Agents and brokers will request quotes from all California admitted markets (i.e., Travelers, QBE, American Alternative, Nationwide, Philadelphia, Mercury and many more). If they all decline, they will also submit to a wholesaler asking them to canvas all the non- admitted markets. The often very loud request from board members to get more bids is understandable but sadly futile. Once you start asking three, four, or five agencies to bid they are all blocked because markets are on a first-come; first- serve basis.
Property Premiums You may have read or heard about the enormous annual premiums associations are facing because of increased risks to insurers. These increases are especially noticeable in residential and commercial condominiums. Some premiums are so exorbitant that associations are not able to secure the limit they need to be insured for the 100 percent Full-Value Replacement Cost without deduction for deprecation or coinsurance. Associations that should have property limits of $50 million or higher only secure $5 to $20 million. Deductibles are higher and usually in the $25,000 to $100,000 range but often come with separate higher wildfire/wildfire smoke deductibles of $100,000; $250,000 and higher and are often “per building” instead of “per occurrence.”
Get More Bids, This is Crazy! Insurance agents and property managers are facing increased frustration from Board members. Agents and managers understand the incredible financial strain this is putting on associations and individuals. Many homeowners believe insurance companies are failing most of their associations. Unless insurance companies provide homeowners with data that contradicts this
Solutions California legislators and the California Department of Insurance have been presented with a number of suggested solutions to the wildfire crisis in the state. These include a state or federally backed fund, much like the National Flood Insurance Program, a conglomerate of carriers similar to the California Earthquake Authority, and a definition of wildfire such that specific types of fire can be separated from others, and carriers can develop language to fit their risk tolerance. To date, the solutions remain in the discussion phase. Homeowners and condominium unit owners can help by contacting the CAI California Legislative Action Committee and following the “Take Action” link (
https://caiclac.com/current-campaigns/)
Forecast - Cloudy with 100% chance of rain. California, Oregon, Arizona, New Mexico, Texas, and other states had numerous wildfires in the last couple of years. Hurricanes in Florida, Texas, the Gulf Coast, and the Atlantic Seaboard will likely end up with a price tag of billions because they impact such a large area. Insurance companies and reinsurance companies are taking massive hits to their reserves due to catastrophic events throughout the U.S. California law does not allow an insurance carrier to set its own rate, the Department of Insurance has that control. As homeowners we are always hopeful of someone willing to come into the market and offer lower premiums. Even lower premiums than what is currently being offered would be welcomed but as of today the insurance industry representative are not aware of any major relief for associations with wildfire exposures.
www.caioc.org 17
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