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California Fires and Insurance Losses

With massive wildfires in October in northern California, and December fires devastating the southern part of the state around Los Angeles, this year will go down in the record books as one of the most devastating fire seasons ever for insurance losses...
December 11, 2017

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With massive wildfires in October in northern California, and December fires devastating the southern part of the state around Los Angeles, this year will go down in the record books as one of the most devastating fire seasons ever for insurance losses. But a voter initiative enacted in 1988 may prevent big increases in property and casualty insurance rates next year.


Under Proposition 103 passed in 1988, and other California insurance regulations, property and casualty insurance companies cannot take all the losses associated with one event, such as this year’s wildfires, and then simply put them onto next year’s rates. The state requires a longer-term trend, not a one- or two-year disaster impact. The insurance industry has been battling Proposition 103 for a long time.

 

California Insurance Commissioner Dave Jones said, “There’s a catastrophe factor in the rate, which is a trend that looks back at catastrophes over the last 20 years.” He estimated this year’s catastrophes will have a “modest impact,” but wouldn’t say how much he thought it would be. “It will not be a dramatic impact,” he said.

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