Records Set in 2017 Were Quickly Broken in 2018
Along the hillside above Santa Barbara, heavy rains gave way to catastrophic mudslides that devastated the communities below. Twenty-one residents lost their lives when massive rocks and debris cascaded through Santa Barbara at an unbelievable velocity. Hundreds of beautiful homes were destroyed or badly damaged. Homeowners insurance policies, including the generous coverage afforded by PURE, typically have limitations on flooding, surface water and earth movement. However, in this case, it was decided that the proximate cause of the damage was actually the Thomas Fire that was extinguished in December 2017. The fire had left the hillside burned and barren with no defense for the subsequent rains. For the PURE members who suffered losses from the aftermath of the Thomas Fire, the cleanup from mud was as complicated and tedious as anything we had seen before. And that was just one month into 2018.
In July, a PURE member in Redding, California, lost their beautiful home in the Carr Fire. The fire had burned up to the member’s property line, but it is believed that the massive amount of embers and floating fire debris were responsible for igniting the home.
In October, the Camp Fire broke out along Camp Creek Road near Paradise, California. It charred nearly 240 square miles, caused damage estimated to be between $11 billion and $13 billion, and claimed at least 85 lives. More than 18,800 structures were destroyed—that’s more than the cumulative damage of every single California wildfire from 2000 through 2016.
The dry conditions, paired with high winds, created record-setting insurance losses in communities that are not among the most populated. These losses only serve to remind us of the potential devastation and financial loss that could occur if a wind-fueled firestorm broke out in one of the densely populated communities that is home to so many PURE members.
In November, a series of fires broke out in the Canyons between Los Angeles and Ventura Counties. From Thousand Oaks to Calabasas and down to Malibu, tens of thousands of spectacular homes were at risk. The Hill Fire was extinguished rather quickly, but the Woolsey Fire destroyed more than 1,000 structures and insurers (especially those who serve the high-value home market) will eventually pay billions in claims.
In the end, many of our members were forced to evacuate, many homes suffered smoke damage and some lost fencing or storage buildings. But we are proud to report that our membership did not suffer any total losses from the Woolsey Fire.
Our underwriting strategy in California has been clear from the beginning and builds on the recognition that California is the largest and most affluent state in the country. We need not take oversized risks in order to add to our overall membership or further our diversification efforts. We obtain a wildfire score from a reputable data source and then apply our own proprietary method of underwriting that takes into account the density of a community and the availability of multiple access roads (believing that fire departments will prioritize areas where there are more residences impacted and less risk to their crew). We evaluate the actual distance to the wildlands and other factors, including an assessment of the brush and vegetation nearby, which would ultimately become fuel for a fire. Hopefully, our underwriters maintain their discipline and select only responsible members who take further care to maintain clearance around their homes and do the little things that make a big difference in protecting against a wildfire.
Disciplined underwriting is a great start, and then our risk management team, claims professionals, colleagues from the Haven Art Group and our wildfire mitigation partners stepped in and worked tirelessly to help individual members prevent further damage.
THE CALIFORNIA INSURANCE MARKET
California has become a very difficult market for home insurance companies. Some insurers have scaled back their appetite in the state, while other smaller companies have been forced to close altogether, leading to an insurance availability crisis in parts of the state. Over the long term, an insurance shortage in California could have serious implications on the housing market and the overall economy.
PURE is not a company that pursues high-risk business, even if the increased premiums might make it a better bet. While this is in the best interests of the membership, it leaves those members who also own higher risk properties (in addition to what they insure with PURE) few options for coverage and none that provide the level of service to which they are accustomed. In response, the parent company of PURE’s Attorney-in-Fact created a new business that combines outside capital willing to take riskier bets with PURE’s high-touch service. PURE Programs is a Managing General Underwriter (MGU) and offers a platform for high-value homes with extraordinary risks that can’t be placed in the admitted market. We started serving families in Florida with homes on barrier islands and those on short-term rental programs, like Airbnb. We expanded into other states and to insure major construction or renovation projects, and in 2018, PURE Programs launched in California and has provided valuable capacity (albeit at a much higher price) with a foundation of great service. PURE Programs has become an important solution for those who live in areas where the exposure to brushfire is too great for an admitted insurance carrier.