The US state of California has taken a step towards securing an insurance policy to protect itself from the costs associated with wildfires and other disasters, following the clearance of legislation by a key assembly committee.
Senate Bill 290, which would see the creation of California Disaster Insurance, was co-authored by Senator Bill Dodd, Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma.
It would function like home insurance, but for the state, with premiums paid by a portion of existing emergency funds.
The policy would trigger a payment to the state in the event of a disaster.
“Rising wildfire suppression costs can strain California’s financial resources and threaten cuts to critical programs,” said Sen. Dodd, D-Napa.
“This bill allows the state to invest in an insurance policy to ensure budget predictability and reduce taxpayers’ exposure to increasing costs associated with disasters, especially wildfires.”
Last year, California spent $947 million for firefighting – nearly $450 million more than budgeted, according to Cal Fire.
Furthermore, Since 2007, California experienced 11 of the 20 most destructive fires in its history.
“With extreme wildfires driving up the cost of firefighting to protect communities, disaster insurance will leave California in better financial shape,” said Commissioner Lara.
“Having insurance for our state budget can help us better prepare before the next disaster strikes.”
Treasurer Ma added, “Today’s action brings us one step closer to giving the governor, myself, and the insurance commissioner the ability to purchase insurance, reinsurance, insurance-linked securities, and other alternative risk transfer products to help pay costs resulting from natural disasters. It makes good financial sense to do this.”