California lawmakers have approved a bill that will allow the state to take out insurance policies to protect it from disasters such as the recent wildfires.
The legislation from Senator Bill Dodd, D-Napa, Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma cleared the Senate this week, creating California Disaster Insurance.
“As climate change continues to contribute to devastating infernos, we need a strategy to reduce the pressure on our state budget,” said Dodd.
“This bill would do just that, allowing the state to invest in an insurance policy to ensure budget predictability and reduce taxpayers’ exposure to increasing costs associated with disasters, especially wildfires,” he explained.
“That savings and predictability would allow us to allocate more resources to wildfire prevention and mitigation efforts.”
Lara also commented: “Right now taxpayers are on the hook when the costs of fighting extreme wildfires go over budget, as they have in eight of the last ten years.”
“Having insurance for our state budget against unexpected disaster costs can reduce the likelihood that California will have to trade off on other priorities, take on debt, or draw from rainy day funds in the future.”
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.”
Last year, California spent $947 million on firefighting – nearly $450 million more than was budgeted, according to the California Department of Forestry and Fire Protection.
The costs of fighting wildfires have overrun Cal Fire’s emergency budget in eight of the last 10 years, and, since 2007, California has experienced 11 of the top 20 most destructive fires in its history.
