California Disaster Insurance Act Passes Key Committee

SACRAMENTO – Legislation by Sen. Bill Dodd, D-Napa, to stabilize state budget costs from major disasters cleared a key committee vote Tuesday.

The bill, co-sponsored by Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma, would give California greater budget predictability and empower the state to invest more to reduce wildfire risk. Senate Bill 290 authorizes the Governor, Insurance Commissioner, and Treasurer to enter into an insurance policy that pays out when California has unexpected disaster costs.

“Climate change has led to devastating wildfires, and we need a strategy to reduce the strain that puts on the state’s coffers,” said Sen. Dodd. “Unpredictable disaster costs require large budget reserves and threaten cuts to critical programs. Allowing the state to invest in an insurance policy will provide predictability and limit taxpayers’ risk of increasing disasters costs.”

“As the risk of extreme wildfires rises we need to make sustained investments for more resilient communities,” said Insurance Commissioner Ricardo Lara. “California Disaster Insurance is a creative solution to protect our communities and our budget in a disaster, giving us flexibility to invest in prevention and keep insurance affordable despite rising threats linked to climate change.”

“Most of us have house insurance, auto insurance, maybe earthquake and flood insurance,” says Ma, whose husband is a career firefighter and has battled several major wildfires. “Why doesn’t the state have disaster insurance to reduce its financial exposure?”

California Disaster Insurance would function like home insurance, but for our state – allowing the state to pay a premium using a portion of existing emergency funds that would trigger a payment to the state in the event of a disaster.

The federal government, the World Bank, and the state of Oregon have all used insurance to reduce the risk to taxpayers following disasters. The State of Oregon has purchased insurance protection against ever-changing wildfire costs for nearly 40 years – spending $61 million on premiums and receiving $102 million in insurance payments.

California has seen the cost of fighting wildfires grow to record levels over the past decade. California spent $947 million in 2017-18 through the emergency fund for firefighting – nearly $450 million more than budgeted, according to Cal Fire. The costs of fighting wildfires have overrun Cal Fire’s emergency budget in seven of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history.

California currently pays for wildfire disasters with available funds, and California Disaster Insurance will come from those same sources.

SB 290 now moves to the Senate Committee on Appropriations.

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Photo (L to R): Senator Bill Dodd and Treasurer Fiona Ma.

Senator Bill Dodd represents California’s 3rd Senate District, which includes all or portions of Napa, Solano, Sonoma, Yolo, Sacramento, and Contra Costa counties. You can learn more about Senator Dodd at www.sen.ca.gov/dodd.