The old way of insuring against fires isn’t working anymore.

Since 2016, more than 50,000 structures in California have been destroyed by wildfire. During fire season in the West, when the sky is dim with smoke and the sun’s an eerie red, you might find yourself breathing in tiny carbonized particles of what used to be someone’s front-porch swing.

These fires are only going to get worse as the climate warms. Unless we want to keep risking lives and inhaling incinerated dreams, something has to change.

The California Department of Insurance last month released new regulations that require insurance companies to reward homeowners who take steps to protect their home from wildfire, such as clearing brush and trees from the immediate vicinity of their home or putting on a fire-resistant roof. The policy is being widely praised. But it raises a broader question: As climate risks to our property, our livelihoods, and our lives mount, to what extent should we cushion the blow of these dangers, and is there a limit to how much, or how long, we pay? Is there a point where protecting people from risk begets more risk?

California makes a good case study because it leads the nation in both annual number and extent of wildfires. Climate change—no surprise—is making things much worse. Eighteen of the 20 largest fires in California history have happened since the turn of the millennium—12 of them since 2016.

Mark Bove, a meteorologist and the senior vice president of natural-catastrophe solutions for Munich Reinsurance America, told me that the California-wildfire situation was rocking the insurance industry. “We are trying to figure out this new landscape along with everybody else,” he said. “All the premium earned over three decades of writing business was gone in the wine-country and Camp fires.” One estimate, from the actuarial firm Milliman, penciled out that two years of fires undid 26 years of profits for the state’s insurers. (Insurers themselves, though, were insulated in part from these losses by their own reinsurance.)

Insurance companies are prohibited by state law from using models of future conditions to set their rates, but with the fires of the past five or so years, even backwards-looking risk calculations are beginning to prompt insurers to raise rates or refuse to renew policies. Some areas are becoming so risky that insurance companies simply won’t sell policies there.

In 32 states, rejected homeowners can always get coverage through programs known as FAIR plans—insurance pools run collectively by every company offering homeowner’s insurance in the state. The companies are legally required to participate and split any losses. A FAIR plan must insure everyone—no matter where a house is built—though their policies tend to cover only the most catastrophic losses. The number of Californians insured under the state’s FAIR plan in 2020 was 241,466. That’s 2.7 percent of the state’s homeowners, up from 1.7 percent in 2015. The percentage is expected to be even higher for 2021.

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