Thoughts on the California fire repercussions

[Bruce Woodruff]

I saw @james wise thread on the fires in general but here are some other thoughts now that this has grown , I think it's important and very interesting...

a) What will happen with CA insurance? They already lost some major players due to the state capping rates https://www.foxbusiness.com/lifestyle/california-insurance-c... will all insurance companies stop coverage, raise rates or reduce what they cover?

b) How do they (Cali Govt) deal with the damage, both in terms of who gets the blame and also where do they get the money? Biden has promised money for 6 mos, but he won't be President in 8 days. And does Congress approve this spending? WIll Trump continue the support? 100% for 6 months is a lot of money.

c) I and friends have quite a few Real Estate contacts in California. They are saying that they are 'beseiged' with calls from LA County residents wanting to relocate out of state....to AZ (mostly). How does this impact AZ Real Estate and other states that will get new residents from this disaster?

d) What happens to Cali's economy? They were already $75 billion in the red (IIRC) and now this....Even with Federal money, the state is going to have to chip in a lot of $$$ and they just don't have it.

e) I saw US Senators this am on TV promising to assist with aid to CA, but ONLY if CA changes it's policies towards, water acquisition and Forestry Mgmt. The state will balk, the CCC and Sierra Club will sue, but can they afford to with a disaster of this magnitude?

[James Hamling]

Quote from @James Wise:

Quote from @Chris Seveney:

Quote from @Bruce Woodruff:

I saw @james wise thread on the fires in general but here are some other thoughts now that this has grown , I think it's important and very interesting...

a) What will happen with CA insurance? They already lost some major players due to the state capping rates https://www.foxbusiness.com/lifestyle/california-insurance-c... will all insurance companies stop coverage, raise rates or reduce what they cover?

b) How do they (Cali Govt) deal with the damage, both in terms of who gets the blame and also where do they get the money? Biden has promised money for 6 mos, but he won't be President in 8 days. And does Congress approve this spending? WIll Trump continue the support? 100% for 6 months is a lot of money.

c) I and friends have quite a few Real Estate contacts in California. They are saying that they are 'beseiged' with calls from LA County residents wanting to relocate out of state....to AZ (mostly). How does this impact AZ Real Estate and other states that will get new residents from this disaster?

d) What happens to Cali's economy? They were already $75 billion in the red (IIRC) and now this....Even with Federal money, the state is going to have to chip in a lot of $$$ and they just don't have it.

e) I saw US Senators this am on TV promising to assist with aid to CA, but ONLY if CA changes it's policies towards, water acquisition and Forestry Mgmt. The state will balk, the CCC and Sierra Club will sue, but can they afford to with a disaster of this magnitude?

 The issue is you cannot force insurance companies to do business in the state. From what I have tried to read from a non partisan site (tough to find nowadays) I believe the issue has been insurance companies lost billions in the past five years and the past 5-10 years have had the most costly fires ever. The state laws (do not quote me) appear to not let these companies increase rates (or its not easy) to pick up the losses. It appears the laws are not business friendly and if that is the case then they will continue to walk away. 

This leads to state funded insurance which will be very costly because only those at highest risk will participate in it and if the losses continue, they eventually will need to get the money from someone (rest of people in california?)

 California is the only state that has essentially put a rent control type of restriction on home owner insurance premiums. As such, about 2-3 million policies have been canceled by the carriers over the last 4 years. Many companies have left the state entirely.

Insurance is a simple math game. 

By the math of it, CA is making it impossible for carriers to operate in CA areas of fire risk. The carriers have no option, they have to discontinue service. The math is clear. 

CA has no financial capacity to fill that void, not a chance. So I say expect the answer being Fed funding. 

And Fed funding means "bill all the rest of America for us". 

The insurance payouts over last years, it's just a mind boggling amount. This one has really broke the camels back for sure.