Disaster insurance bill advances in California Legislature

  ·  Daily Democrat   ·  Link to Article

SACRAMENTO — California could take out an insurance policy to protect itself from emergency response costs arising from wildfires and other unexpected disasters under legislation that cleared a key Assembly committee Wednesday co-authored by Sen. Bill Dodd, D-Napa, Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma.

“Rising wildfire suppression costs can strain California’s financial resources and threaten cuts to critical programs,” said Dodd.  “This bill allows the state to invest in an insurance policy to ensure budget predictability and reduce taxpayers’ exposure to increasing costs associated with disasters, especially wildfires.”

“With extreme wildfires driving up the cost of firefighting to protect communities, disaster insurance will leave California in better financial shape,” said Commissioner Lara. “Having insurance for our state budget can help us better prepare before the next disaster strikes.”

“Today’s action brings us one step closer to giving the governor, myself, and the insurance commissioner the ability to purchase insurance, reinsurance, insurance-linked securities, and other alternative risk transfer products to help pay costs resulting from natural disasters,” said Ma. “It makes good financial sense to do this.”

Senate Bill 290, which cleared the Assembly Insurance committee, creates California Disaster Insurance. It would function like home insurance, but for the state, with premiums paid by a portion of existing emergency funds. The policy would trigger a payment to the state in the event of a disaster.

Last year, California spent $947 million for firefighting — nearly $450 million more than budgeted, according to Cal Fire. The costs of fighting wildfires have overrun Cal Fire’s emergency budget in eight of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history. The federal government, the World Bank, and the state of Oregon have all used insurance to reduce the risk to taxpayers following disasters.