Fire Prevention Month: Revisiting Fire Preparedness

Author, Megan Lockhart, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

October is Fire Prevention Month. The National Fire Protection Association (NFPA) dedicated this month to spreading awareness for fire safety and prevention. The construction industry is particularly vulnerable to fire danger, making this a good time to re-evaluate your company’s fire hazards and training protocol. 

Local fire departments responded to an average of 4,300 fires in structures under construction per year from 2016 to 2020, and 4,750 construction fires occurred in 2020 alone. A few of the most common causes of fires on the jobsite include hot work such as welding and soldering, temporary heaters and electrical lighting, flammable liquids and gasses, and smoking.

In addition to the fire hazards in the construction industry, the month of October poses high risk for wildfires across the state of California, especially Southern California. 

“Most fires happen between the months of April and October, as weather becomes warmer and drier,” an article published by CalMatters said. “In Southern California in particular, the hot and dry Santa Ana winds increase wildfire risk in October and November.”

As fire risk increases throughout this month, it's a good idea for clients to evaluate their fire safety programs and eliminate possible hazards. Rancho Mesa offers training resources in the SafetyOne™ app with several online courses for fire prevention.

Additional dates for our Wildfire Prevention and Wildfire Smoke Regulations webinar have been added to the calendar this month if clients are interested in registering.

Historic Wildfire Losses Alter Risk Assessments for Many Buildings

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

The 2017 historic wildfire losses and ever-changing atmospheric conditions continue to alter the commercial property insurance marketplace in 2021.

Insurance carriers have used the CoreLogic® Wildfire Risk Score to evaluate risk and pricing since 2003 without significant changes to the Risk Score’s calculation. However, 2017’s wildfire season put change in motion.  

According to CoreLogic, 2017’s fire activity increased in scope and occurred in areas that previously had not been considered high risk areas. Analysis of the fires’ impact noted the surprising intensity with which the fire spread and how the fires burned deep into urban residential neighborhoods without the traditional fuel sources one would expect to see. The analysis also determined that both wind and drought played a major role in the fires’ spread and severity.

Since 2017, California has experienced its most destructive fire in its history, the Camp Fire which burned in 2018 and its most destructive fire season on record in 2020. Analysis of the destruction and pre-fire conditions confirmed the relationship between drought and wind with the size and scope of the fires.

In response to the growing data set and changing conditions, CoreLogic now incorporates wind risk data and the drought factor into the 2021 Wildfire Risk Score. While some structures will see no change in risk score, other areas will be negatively impacted. The bottom line is the wildfire risk score will make some structure very difficult and costly to insure properly.

Rancho Mesa clients and brokers will continue to discuss the changing property insurance landscape as more information and underwriter feedback is gathered.

To discuss how to best insure your commercial property, please contact me at (619) 937-0175 or sbrown@ranchomesa.com.

Fire, Earthquakes, Leaks, Oh My! Property Insurance Market Continues to Worsen

The 2018 California Wildfires brought unprecedented destruction and loss to the region. The total value of insurance claims is estimated to exceed $13 billion. While some have theorized that Pacific Gas & Electric (PG&E) will reimburse insurance companies as a result of its negligence to maintain trees and equipment that caused the destructive wild fires, many believe this will not be the case.

The total damages expected to fall on PG&E exceeds $30 billion, most of which will go towards municipalities before it goes to the insurance companies. This is omitting any lawsuits that have yet to be filed. Also, much of what PG&E will be required to pay will come from…its insurance policy. 

Alternative Options to the Standard Market

Many of our clients have opted for alternative options to the standard insurance programs most are accustomed to purchasing to cover their property. These alternative approaches are allowing our clients to save money while still insuring their property to a level that they feel comfortable.

Many of these options are backed by the state of California and allow the client to have key coverage for fires, water leaks, vandalism, etc. while saving, in many cases, 60-80%. There is no limit to property size and geographic location on these alternative programs.

For more information about alternatives to standard insurance programs for property coverage, please contact Rancho Mesa Insurance Services at (619) 937-0164.

California Non-Profits Brace for Higher Insurance Premiums and Dramatic Changes to Coverage

Author, Chase Hixson, Account Executive, Human Services Group, Rancho Mesa Insurance Services, Inc.

For years, the insurance marketplace for non-profits, specifically general liability, abuse, property and management liability have been somewhat stable (subject to loss history, of course). Unfortunately, that is looking to change as the marketplace braces for significant correction.

The key drivers of change:

• 2018 Wildfire Season
  An estimated $12 Billion in losses has forced carriers to offset those losses with higher premiums, regardless of the amount of property exposure. Reinsurance markets (insurance for insurance companies when a loss becomes catastrophic) suffered significant losses, as well, and have had to increase their rates on the insurance companies they insure.

• Increase in Harassment/Discrimination Claims
  Though the exact reason is unknown, many point to the #MeToo movement as the reason for more than double the harassment and discrimination claims that have occurred the last three years. We have already seen significant increases not only to premiums, but also deductibles.

• Incoming Influx of Abuse Claims
  With changes to California law, insurers expect an uptick in claims beginning January 2020 when the statute of limitations will be lifted for reporting child abuse. We expect to see significant increases in premium as well as coverage being reduced or even eliminated in some scenarios.

What can you do to help your organization? Get out ahead of it early and be prepared to sell your organization to the marketplace. The insurance carriers will need to have a clear picture of what your organization is doing to be different when compared to the organizations that are causing the losses. It may seem like a lot of information to present to a carrier, but failure to do so will lead to increased costs for your organization.

Contact Rancho Mesa Insurance at (619) 937-0164 if you would like to discuss how these changes may affect your organization.

California Wildfires Distress Insurance Market

2018 saw the most destructive wildfire season ever recorded in California. Over 1.8 million acres were burned; 22,751 buildings were destroyed and over 100 lives perished. As a result, insurance claims have exceeded $12 billion and are expected to rise.

Many in the industry expect we are on the verge of a crisis and from what I’ve seen so far, I’d have to agree. The marketplace is in frenzy as carriers aren’t sure what their overall financial hit will be. Furthermore, catastrophic losses like this affect the reinsurance marketplace, which causes pressure downstream to insurers.

Below is a look at what we are seeing in the marketplace.

Non-Renewals

Most carriers are non-renewing their entire books of business who are at risk of wildfires. Even if the client has been with the carrier many years with no losses, they are simply non-renewing properties on accounts in certain areas prone to wildfire. This is essentially leaving the marketplace with very few players.

Significant Premium Increases

Those carriers still willing to write property accounts are hiking up premiums significantly. We’ve heard of increases 5-10 times the previous year’s premiums. We recently spoke to an insured in the Riverside area whose insurance premium went from $85,000 to $500,000 a year. 

Increased Deductibles for Wildfires

On top of the significant premium increases, most carriers are offering increased deductibles for wildfires. It’s not uncommon to now see $150,000, $250,000 and $500,000 deductibles depending on the value of the building(s).

What Can Business Owners Do?

Business owners need to act early and quickly. Speak with a broker to plan ahead because it looks like there will be a significant financial burden and risk (per increased deductible) moving forward. The marketplace is inundated with excessive submissions, so the need to submit as early as possible is imperative. There are alternative insurance programs that can act as a temporary solution while helping alleviate cost burdens. Some declinations can be avoided by proper abatement of brush and trees or installation of fire suppression systems. Regardless of when the insurance policy renews, I suggest getting started on this as soon as possible. The marketplace could take several years to stabilize. 

For help understanding how wildfires can affect your organization’s insurance premium, contact Rancho Mesa Insurance Services at (619) 937-0164.