Insurance Industry Assessing Calif. Wildfires, Sends in Assistance

Insurance industry professionals are rallying the troops, bringing in claims professionals and others to assist in battling several major wildfires burning across Southern California.

On Sunday, Gov. Arnold Schwarzenegger proclaimed a State of Emergency in the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura, due to more than 11 major wildfires ablaze in the area. By his count on Sunday, more than 30,000 acres had already burned, taking with them homes, businesses and other structures.

Strong Santa Ana winds gusting at 60 mph, and dry conditions are exacerbating the problem, creating the potential for losses in several more areas, insurance industry analysts noted.

“The weather conditions forecasted for the next 24 hours remain conducive to explosive fire spread, so the damage could be very severe unless the fires are quickly contained,” said Neena Saith, catastrophe response analyst at Risk Management Solutions.

According to the risk modeling company, “over 900 properties have been destroyed and thousands more remain threatened. The Witch fire in San Diego County has caused the most destruction so far, burning over 145,000 acres of land and destroying more than 700 homes and businesses.”

But it is the Canyon fire that many insurers will be keeping a close eye on, as it threatens properties in Malibu in Los Angeles County, worth millions of dollars. The Canyon wildfire “threatens some of the area’s most luxurious homes, including multimillion dollar mansions in the coastal community of Malibu,” said Glen Daraskevich, vice president of research and modeling at AIR Worldwide.

That fire, which inspectors suggest was ignited by a downed power line late Sunday morning, had spread more than 2,000 acres by nightfall, destroying 25 structures, including the Malibu Presbyterian Church and Kashan Castle — a well-known venue for charity events. The blaze also destroyed five homes and is threatening about 600 more in its path, AIR said. The blaze has forced at least 1,500 residents from their Malibu homes, and students and faculty were forced to leave the campus of nearby Pepperdine University, AIR and RMS said.

Elsewhere, residents from about 10,000 homes northeast of San Diego have been ordered to evacuate. In Santa Clarita, about 35 miles northwest of downtown Los Angeles, a larger fire has ravaged more than 12,500 acres, fueled by gusts up to 80 mph. Officials estimate that this blaze has destroyed 25 buildings and threatens 3,800 homes. About 900 homes in the valley are without power, and the fire has not yet been contained, AIR stated.

Despite the incoming losses, Tully Lehman, insurance industry spokesman for the Insurance Information Network of California cautioned against predicting total insured losses too soon. “At this point in time, most people are trying to figure out how many homes have been destroyed and have no idea how big [the disaster] is,” he said. “One of the things to remember when talking about insured losses is that it’s completely different from market value. When talking insured losses, reconstruction cost is not equal to market value,” he said.

Nevertheless, the current fires have the potential to inflict widespread damage. “Damage from wildfires ravaging California this week highlight a recent trend: In the past few decades, there has been a clear tendency for increased property loss due to wildfires,” AIR’s Daraskevich said. “This is a direct consequence of rapid construction growth in the wildland-urban interface (WUI) — a region where primitive, undeveloped forest meets urban expansion. Losses from this week’s wildfires, in the luxurious Malibu community in particular, are likely to reflect this trend.” (For more information on WUI construction and its affect on fires, see Insurance Journal West Region’s Oct. 22, 2007, issue.)

Lehman advised individual agents to contact and assist their affected customers as soon as possible. “A great number of calls are going to be coming in,” he said. “A lot of homeowners insurance companies are bringing in resources from other areas of the country and are starting to mobilize in the area to assist people who’ve been evacuated. One thing that might help is to make sure people know what they’re covered for and how payments are reimbursed. (Agents and brokers) can already begin to assist people who’ve been evacuated.”

IINC also has set up a list on its Web site with insurance companies’ claims contact information. Agents can make sure their insurers are on the list by visiting www.iinc.org, Lehman suggested. The Insurance Information Institute has a similar list of insurers’ 1-800 numbers in California. Visit www.iii.org/media/updates/press.778237/ to view the list.

Additionally, the California Department of Insurance also has set up a hotline to assist residents who have questions or problem with their insurance policies. The DOI number is 800-927-HELP (4357). And the Department said it has contacted insurance companies’ Catastrophe Assistance Teams to ensure they are smoothly integrated into the disaster response effort.

“The Department of Insurance has offered to support local officials at their ‘one-stop-shop’ disaster assistance centers, in addition to the facilities coordinated by the Governor’s Office of Emergency Services,” Commissioner Steve Poizner said. “I have fraud-fighting teams ready to move into fire storm areas once it is appropriate. Additionally, at the request of the San Diego Sheriff’s Department, we have deployed approximately a dozen investigators for assistance. We also have teams on standby for the Lake Arrowhead and San Bernardino areas.”

The last fire to affect the Southern California-Los Angeles-San Diego region was “rated as high to extreme on the RMS wildfire hazard scale, (and) was struck by up to 15 wildfires in October 2003,” RMS’ Saith said. “The most destructive of these was the Cedar Fire in San Diego which burnt over 270,000 acres and damaged more than 4,900 properties, causing around $1.1 billion in insured losses.”

To give the fires some historical perspective, both the IINC and Insurance Information Institute have listed past fires and associated insured losses on their Web sites at www.iinc.org, and www.iii.org/media/facts/statsbyissue/wildfires/.

Both AIR and RMS said they are closely monitoring the California wildfires and will issue additional information and insured loss estimates when the situation stabilizes.

“This is a very dynamic situation that’s constantly changing,” Lehman said. “We’re still hearing about fires cropping up in other areas. In the coming days, we’ll see what happens.”

Insurance Journal will continue to update this story as information becomes available.