California May Seek Insurance Policy To Cover Unexpected Disaster Costs
SACRAMENTO (CBS SF) – State Sen. Bill Dodd, D-Napa, introduced a bill Thursday that would authorize state officials to enter into an insurance policy that pays out when California has unexpected costs for disaster response.
The proposed California Disaster Insurance would function like home insurance, but it would allow California to pay a premium to an insurance company using a portion of existing emergency funds that would then trigger a payment to the state in the event of a disaster.
"You (the state) pay an annual premium and if a disaster strikes, after you pay the deductible the plan pays you back for your losses," Insurance Commissioner Ricardo Lara said.
Dodd and Lara announced Senate Bill 290 in Sacramento Thursday morning. Both said state Treasurer Fiona Ma supports the proposed legislation.
California currently pays for wildfires with available funds, and California Disaster Insurance will come from the same sources, Dodd and Lara said.
California spent $947 million in 2017-2018 through an emergency fund for firefighting, more than $450 million than budgeted, according to Cal Fire.
Firefighting costs have overrun Cal Fire's emergency budget in seven of the last 10 years, and California has experienced 11 of the top 20 most destructive fires in its history since 2007, Dodd said.
"Rising wildfire suppression costs can strain California's financial resources and threaten cuts to critical programs," Dodd said.
"As climate change continues to contribute to devastating infernos, we need a strategy to reduce the pressure on state and community coffers. 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 wildfire," Dodd said.
Dodd said the state will secure disaster insurance on terms that are beneficial to taxpayers and keep the public safe "without breaking the bank."
"This gives us a choice. If the premiums are too high, we walk away," he said.
The state of Oregon has purchased insurance protection against changing wildfire costs for nearly 40 years. Oregon has spent $61 million in premiums and received $102 million in insurance payments.
SB 290 only authorizes the governor, insurance commissioner and treasurer to enter into an insurance policy.
"Once we have the authority, we can develop a product that works for everyone. This (bill) is a first step," Lara said.
"We want to see if there is interest to engage insurers statewide in this policy," Lara said.
"The insurance industry will decide if they want to do this or not. I think there will be interest," Dodd said.
In a written statement, Treasurer Fiona Ma said, "This policy makes annual wildfire suppression costs more predictable, protecting the taxpayers from the volatility that has been seen over the past several years and creating budget stability and preserving other investments. It is time for California to be proactive and not reactive."
SB 290 must be in print for 30 days before it can be scheduled for a committee hearing.
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