Lawmakers Approve State Disaster Insurance Bill

SACRAMENTO – Legislation from Sen. Bill Dodd, D-Napa, Insurance Commissioner Ricardo Lara and Treasurer Fiona Ma that would protect state coffers from unexpected disaster expenses has cleared the Senate. Senate Bill 290 authorizes the governor to take out an insurance policy that pays off when California is hit with response costs such as in the case of the recent wildfires.

“As climate change continues to contribute to devastating infernos, we need a strategy to reduce the pressure on our state budget,” said Sen. 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. That savings and predictability would allow us to allocate more resources to wildfire prevention and mitigation efforts.”

”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,” Commissioner Lara said. “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.”

“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,” said Treasurer Ma. “It makes good financial sense to do this.”

Senate Bill 290, which passed late yesterday, creates California Disaster Insurance. It would function like home insurance, but for the state, with premiums paid by a portion of existing emergency funds. The policy would trigger a payment to the state in the event of a disaster.

Last year, California spent $947 million 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 eight of the last 10 years. Since 2007, California has experienced 11 of the top 20 most destructive fires in its history.

The federal government, the World Bank, and the state of Oregon have all used insurance to reduce the risk to taxpayers following disasters.

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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.