PROPERTY INSURANCE REPORT the Authority on Insuring Homes and Commercial Property

Reprinted With Permission Of The Publisher PROPERTY INSURANCE REPORT The Authority on Insuring Homes and Commercial Property Vol. 27#19/643 March 15, 2021 Florida Targets Roof Coverage, INSIDE Lawsuits to Defuse Market Crisis Wildfire mitigationis essential outside of Not for the first time, theFlorida homeowners insur- designated wildfire zones.Page 2 ance market is in crisis. Insurers argue that without legis- lation to rein in litigation and roof claims, the situation can Clearing vegetation yields savings. Page 3 only get worse. Senate Bill 76, which addresses both roofing losses and Financially struggling insurers withdraw from parts of Florida. Page 5 litigation incentives, has won approval from two key Senate committees and is on its way to the Rules Committee, the Limiting roof repair costs presents significant last stop before a full Senate vote. challenges. Page 9 The proposed law would limit coverage in standard policies for roofs more than 10 years old – dramatically Progressive cracks the top 10. Page 11 increasing out-of-pocket costs for consumers; shorten the deadline for filing property claims from three to two years; NAIC: Homeowners Premium require 60-days’ notice and a settlement demand before Rose About 4% in 2020 filing suit over a property claim; provide a formula for Homeowners insurers grew awarding attorney fees; and codify federal limits for the use written premium about 4.0% in 2020, less than the 5% growth of Please see FLORIDA on Page 4 2019 and 4.8% growth of 2018, according to a preliminary report Finding Effective Mitigation For by the National Association of Wildfire Requires New Modeling Insurance Commissioners. Removing plants and clearing space around existing The NAIC’s projected loss homes in California, paired with additional mitigation ratio of 66.5% is a deterioration steps, could prevent billions of dollars in wildfire losses an- from 58.2% in 2019, but still nually, according to research from catastrophe risk modeler better than the 72.4% of 2018 Zesty.ai. and 73.5% of 2017, both years The San Francisco-based company analyzed aerial im- suffering from large California agery to identify how individual property characteristics wildfire losses. impacted wildfire losses and which mitigation steps would The report, available on the prevent the most damage in the future. NAIC website, captures data The analysis comes as California grapples with a home- from 97.3% of company filings owners insurance crisis in the wake of devastating wildfires. and includes premium written Regulators are pressuring insurers to offer coverage and by U.S. carriers in Canada and discounts to homeowners who have taken steps to protect U.S. territories. It is very close to their homes, but insurers say they still lack enough data to what the final numbers will be. quantify the effectiveness of specific mitigation steps and We will be publishing our more how much they should be rewarded. Last month, California Please see PREMIUM on Page 11 Please see WILDFIRE MITIGATION on Page 2 33765 Magellan Isle • Dana Point, CA • 92629 • (949) 443-0330 • www.riskinformation.com Reprinted With Permission Of The Publisher Page 2 PROPERTY INSURANCE REPORT March 15, 2021 WILDFIRE MITIGATION Continued from Page 1 ance Report National Conference presented on- Insurance Commissioner Ricardo Lara pro- line. (Watch the video presentation here.) posed new transparency rules that would require The fire was a wakeup call, Toth said. “Most insurance companies to give policyholders ac- of the $9 billion of losses from this single event cess to their property’s wildfire risk scores, and were driven by surprise losses outside of the along with it the opportunity to make mitigative high fire-hazard zones.” improvements to lower their score. Wildfire risk Across all fires in California that year, about scores play a large role in pricing. $15 billion of $20 billion in overall wildfire loss- Zesty’s research offers early insights into es were insured. In 2018, about $18 billion of the which actions carriers, regulators and the public $24 billion in overall losses were insured. Losses should prioritize as they accept that the 2017, subsided in 2019 before rising again to about $11 2018 and 2020 wildfire seasons could represent billion in total losses in 2020. The three spikes a destructive new normal. Zesty’s data suggests pushed the 10-year average to about $5 billion in which improvements homeowners can make to annual losses, a figure that will increase substan- protect homes in at-risk locations. It also tells tially if future wildfire seasons reflect the pattern insurers which presumably safe properties have set by three of the last four years, he said. characteristics that make them unexpectedly vul- Zesty’s study follows work done by IBHS nerable to wildfire losses and which properties in last summer to tailor mitigation recommenda- tions for homeowners in suburban areas that may The study ranked mitigation be more limited in how many feet of vegetation steps based on their potential they can clear because of close proximity to for reducing losses and the fea- neighbors, compared to more rural homes with sibility of implementing them. ample space. The mitigation research by both parties has an inherent collaborative message: risky areas are actually well protected. While one homeowner may not be able to clear Further research by modelers like Zesty and 30 feet of vegetation from their perimeter, two organizations like the Insurance Institute for neighbors side-by-side, each clearing 10 to 15 Business & Home Safety (IBHS), which con- feet, can combine to reduce the spread of wild- tributed research to Zesty’s project, will allow fire. insurers to quantify the benefits of clearing de- Similarly, if both houses have screens that fensible space around a home, protecting vents prevent embers from entering vents, neither with screens or other mitigation strategies. home will present a risk to the other by catching The Tubbs Fire in 2017 underscored the risk fire. In addition to the costs of mitigation, con- of relying on traditional wildfire risk areas – like vincing homeowners to potentially reduce the those designated by the state of California as a curb appeal of their property by replacing bushes Fire Hazard Severity Zone – that draw bound- and trees with rocks is another challenge. aries based on broad physical or geographic In its report, Zesty compared high-resolution attributes rather than individual property charac- aerial imagery taken before and after about 1,400 teristics. recent California wildfires to analyze which In the Tubbs Fire, about 100 properties property and building characteristics resulted burned within the high fire-hazard zones, and in fewer losses. The images provide data about about 5,000 properties burned outside of where a roof’s material and shape, if vegetation over- the industry expected losses to occur, Zesty CEO hangs the property, or how close other plants, Attila Toth said during the 2020 Property Insur- Please see WILDFIRE MITIGATION on Page 3 Warning: Property Insurance Report is a confidential, copyrighted newsletter for subscribers only. No part of this publication may be reproduced by any form or means, including scanning or photocopying, without prior permission of the Publisher. For information call (949) 443-0330. Reprinted With Permission Of The Publisher March 15, 2021 PROPERTY INSURANCE REPORT Page 3 WILDFIRE MITIGATION Continued from Page 2 tation between 30 and 100 structures or objects may be, among other infor- feet, which was defined as mation. “very challenging.” That Overlaying this property-specific information would save about 19% with a risk model that evaluates broader factors of threatened homes, or – such as topography, wind direction and precip- about $900 million. itation – Zesty estimated about 8.8 million Cali- “This is not only fornia properties are at low or no risk. about changing the curb Of the remaining 1.2 million properties in appeal of your own home, risky areas, aerial information can help reveal you have to work togeth- Attila Toth which properties, based on their individual char- er with the neighbors,” Zesty.ai acteristics, are actually at high risk and which he said. “And probably can be underwritten with more confidence. the city or the township has to chip in, as well, Toth provided the example of a property in because there will be vegetation that will be on the Malibu Hills that survived the destructive public property.” Woolsey Fire. The home is deep into the wild- The report had some surprising findings. No- land-urban interface (WUI) area at risk for wild- tably, incentives for homeowners to replace vul- fire losses, and modeling without property-spe- nerable wood shake roofs have worked, leaving cific characteristics would suggest the house was few that need replacement with more resilient a likely candidate to burn down. But it survived. materials. Viewed from above, images show a house with Aerial imagery revealed that only about 0.1% ample defensible space around its perimeter — of homes in California still have the vulnerable no trees, bushes, fences or decks. material covering their homes. About 76% have The study ranked similar mitigation steps better composite shingles and 22% have tile, the from “feasible” to “difficult” and calculated the best-performing material. Homes with flat, slate overall improvement each step would have on and metal roofs each make up 1% of the housing losses in California if applied across all at-risk stock. homes. A bigger opportunity for loss prevention The most “feasible” action – clearing vege- is upgrading houses built before 2008 to the tation that overhangs homes, like trees – would building code created that year. Chapter 7A have a modest impact, saving about 6% of the of the 2008 California building code requires 2,876 California properties estimated to be lost new homes in wildfire risk areas to use specific annually to wildfire at the current 10-year aver- fire-resistant materials, like fire-retardant roof age.

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