Los Angeles wildfire victims worry insurance won't cover rebuild costs, facing potential bankruptcy for insurers and soaring premiums.
As Los Angeles construction worker Ivan De La Torre examined a scene of smoking debris in fire-stricken Altadena, a question lingered in his mind: how would insurance providers manage the expense of reconstructing an entire neighborhood?
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"My worry is that the insurance companies won't be able to handle all the claims and declare bankruptcy, and that will be the end of it. It's unsettling," stated De La Torre, 32, whose uncle and sister both lost their residences in a fire that consumed half of Altadena, a suburb north of Los Angeles with a population of approximately 40,000.
Leo Frank III, a 66-year-old actor who lost his family home in Altadena, indicated he fears insurers might delay payments on claims and fail to cover the total cost of reconstruction.
"We will rebuild. Nobody is taking our house," said Frank, while searching for a shower seat for his 96-year-old mother in a parking area filled with donated supplies in Pasadena.
"But it will be chaotic."
Frank mentioned he knows some neighbors who lost their homeowners coverage before the fires as insurers withdrew from arid regions in California increasingly susceptible to wildfires.
"We were fortunate to still have a policy," he said.
The wildfires, among the most severe natural disasters to ever impact California, have resulted in the deaths of at least 11 individuals and destroyed or significantly damaged over 10,000 structures.
Reuters contacted nine of the leading home insurance companies in California for comment.
State Farm, Nationwide, Allstate, Mercury, Liberty Mutual, and Farmers responded with statements indicating they were collaborating with policyholders to assist them in making claims, without addressing specific concerns about residents not receiving adequate payouts or escalating future premiums.
Following the fires this week, California Insurance Commissioner Ricardo Lara invoked moratorium powers to suspend all policy non-renewals and cancellations from insurance companies for a period of one year.
Lara stated in a release on Friday that next week he will conduct free insurance workshops in Santa Monica and Pasadena, suburbs situated near the two largest fires.
U.S. insurance stocks declined on Friday as analysts estimated the insurance costs from the wildfire could exceed $20 billion. Private forecaster AccuWeather estimated the damage and economic loss from the fires at $135 billion to $150 billion, suggesting soaring costs for homeowners' insurance.
STATE INSURANCE
Although Altadena has not previously experienced fire devastation on this scale, the suburb is located at the base of the San Gabriel Mountains, which are prone to wildfires. This has made obtaining fire insurance more challenging.
Many residents in Altadena, a racially and economically diverse suburb, are covered by the California FAIR Plan, an insurance program supported by the state of California that is utilized by property owners who cannot secure private market coverage.
FAIR Plan did not respond to a request for comment.
As private insurers have declined or dropped homeowners in fire-prone areas of California, residents have increasingly switched to FAIR Plan, data indicates.
As of the end of September of the previous year, 958 homes in Altadena were covered by the scheme, an increase of 28% from the preceding year, according to data from the insurer.
In Pacific Palisades, an affluent suburb west of downtown Los Angeles ravaged by wildfires this week, the increase in the use of the FAIR plan has been more pronounced. There are 1,430 homes covered under the scheme, an increase of 85% from the preceding year and quadruple the number in 2020, the insurer's data revealed.
Gabby Reyes, whose home in Altadena was destroyed in a fire on Wednesday morning, stated that FAIR Plan staff had been helpful but she was concerned that her policy would not be sufficient to cover rebuilding the home she shares with her mother and daughter, given the fire has only left behind the foundations.
"They have been communicating with us, and they have been very helpful," Reyes told Reuters, adding that property speculators had contacted her without invitation to inquire if they could purchase her land.
"You cannot contact people in that manner when they are experiencing such devastation."