Introduction of a Groundbreaking Wildfire Resilience Policy
Willis, a business unit of WTW, in collaboration with The Nature Conservancy (TNC), has unveiled a $2.5 million wildfire resilience insurance initiative for the Tahoe Donner Association, located in Truckee, California. This policy is heralded as the first-of-its-kind, with its pricing intricately tied to proactive measures for wildfire risk mitigation.
Development and Purpose
Crafted in association with UC Berkeley’s Center for Law, Energy and the Environment (CLEE), the insurance policy aims to showcase how ecological forest management can potentially reduce insurance premiums and enhance availability. Techniques such as tree thinning, which promotes the health of remaining trees, and controlled burns to clear combustible vegetation are highlighted as effective risk-reduction strategies. Since 2015, Tahoe Donner has completed forest management projects over 1,520 acres.
Comments from Experts
Kristen Wilson, Lead Forest Scientist at The Nature Conservancy in California, stated, “By placing this innovative insurance product, we hope to inspire other insurance underwriters to account for the benefit of thinning and prescribed fire and increase the implementation of this type of work more broadly.”
Insurance Policy Benefits
WTW highlights that traditional insurance policies in areas benefiting from forest treatment have not typically incorporated the risk reduction from fire mitigation. This new policy, covering 1,345 acres of Tahoe Donner’s land, boasts a 39% lower premium and an 89% lower deductible than would have been possible without such ecological management.
The Current Wildfire Insurance Crisis
California’s ongoing wildfire challenges exert pressure on the state’s insurance sector. David Williams, Associate Director of Alternative Risk Transfer Solutions at Willis, remarked, “The forest management work completed by Tahoe Donner, by removing fuel that could burn and leading to a lower fire risk, has considerably reduced the premium and deductible in this insurance policy.” He added, “At a pivotal moment for California’s insurance market, Willis has worked across the industry to bring this solution to Tahoe Donner, placing the insurance with Globe Underwriting, in a positive step towards a more resilient and sustainable insurance industry.”
Role of Globe Underwriting
Globe Underwriting, formerly Forest Re, is acknowledged internationally for its expertise in forestry risk assessment and profiling, providing critical empirical analysis to support the premium and deductible reductions.
Statewide Insurance Challenges
This announcement comes amidst a wave of insurance policy non-renewals across California, affecting thousands of residents, including recent victims of wildfires. The Pacific Palisades saw numerous policies non-renewed just before devastating Los Angeles wildfires. Over the past five years, hundreds of thousands of homeowners in California have experienced non-renewals, leading to a significant rise in policies under California’s FAIR Plan, the state’s insurer of last resort. This plan saw residential policy numbers surge by 123% between September 2020 and September 2024, primarily due to wildfire risk.
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