The California Disaster Insurance bill (SB 290), proposed new legislation that could see the introduction of a state insurance policy to assist with natural catastrophe costs, has passed a key committee vote.
The bill has been designed in response to the increasing costs of natural catastrophe events in the region, from a range of perils including wildfires, earthquakes, and floods.
Co-sponsored by Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma, the bill aims to provide California with more budget predictability and enable the state to increase investments to lower wildfire risks.
As we discussed previously, the bill would function like home insurance except for the state, with premiums being paid using existing emergency funds that would trigger a payment in the event of a catastrophe.
Senator Bill Dodd, who introduced the legislation, said: “Climate change has led to devastating wildfires, and we need a strategy to reduce the strain that puts on the state’s coffers. Unpredictable disaster costs require large budget reserves and threaten cuts to critical programs. Allowing the state to invest in an insurance policy will provide predictability and limit taxpayers’ risk of increasing disasters costs.”
Lara added: “As the risk of extreme wildfires rises we need to make sustained investments for more resilient communities. California Disaster Insurance is a creative solution to protect our communities and our budget in a disaster, giving us flexibility to invest in prevention and keep insurance affordable despite rising threats linked to climate change.”
This move would see California join the federal government, the World Bank, and also the state of Oregon, which have all used insurance protection to reduce the risk to taxpayers following natural disasters.
“Most of us have house insurance, auto insurance, maybe earthquake and flood insurance. Why doesn’t the state have disaster insurance to reduce its financial exposure?” said Treasurer Ma.