Changes in the climate which have led to two consecutive severe wildfire seasons will make insurance companies even more cautious about writing in California’s higher risk areas. When insurance companies become more cautious, the result is that either insurance companies withdraw from the market or they increase premiums to reflect the higher risks and potential for higher claims.
As A.M. Best writes, “Urbanization and growing population density in heavily wooded areas, as well as hotter, drier conditions resulting from rising temperatures and declining precipitation, are contributing to wildfires becoming an increasingly frequent peril for insurers and citizens of California. As this year has progressed, so have the wildfires that continue to engulf numerous areas of the state.”
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