THE SET-UP: California’s “surplus lines” insurance market is telling us something.
Surplus lines insurance is a less regulated type of property and casualty insurance traditionally reserved for risky or unusual homes and businesses … they could be large luxury homes and estates or a business that stores or moves hazardous waste or anything deemed too risky or too complicated for strictly-defined, highly-regulated insurance policies. As a result, these policies are generally more expensive than traditional insurance.
Enter Insurance Journal, which ran a new piece today by Mikhail Gorshunov on the rapidly changing surplus lines market in California. Gorshunov is a data scientist for The Surplus Line Association of California and he’s been doing some interesting data science. Gorshunov first notes how “relatively stable and predictable” the home insurance market had been in California “for many years.” It’s a bygone era when changes were “incremental” in a market that “largely catered to established patterns of risk and pricing.”
But that’s changed in “recent years” as “dramatic shifts” reshape the insurance business thanks to “unprecedented activity” in the surplus lines insurance market. In 2024, he explains, “new business policies increased dramatically, from about 31,000 in 2023 to more than 150,000 in 2024—a staggering growth of 383%.” Here’s why that matters:
Historically, surplus lines homeowners insurance policies have been associated with high-value, unique or high-risk properties, resulting in larger insurance premiums, higher replacement costs and more complex underwriting requirements. However, the data for 2024 paints a different picture, one that aligns more closely with the characteristics of policies typically associated with the admitted homeowners insurance market.
The “admitted “ market is insurance market that’s fully regulated by the state. It’s also the type of market major carriers are exiting in California and Texas and Florida. In California, though, there is another shift…
Assessed values for new business policies in 2024 averaged $0.9 million, a significant decrease of 47% compared to $1.7 million in 2023. Replacement costs experienced a similar decline, dropping by 44%, from $1.6 million in 2023 to $0.9 million in 2024 (Table 1). These reductions are substantial, indicating that the surplus lines market is increasingly insuring properties of lower value—properties that are less complex and were once comfortably within the scope of admitted carriers.
The shift from admitted to surplus policies is average size is declining, too…
The average square footage of newly insured properties fell from 2,837 square feet in 2023 to 2,131 square feet in 2024, marking a 25% reduction. Additionally, the average burn probability—a metric indicating the annual likelihood of a wildfire occurring at a specific location—has decreased by 31%, from 0.26% in 2023 to 0.18% in 2024 (see Table 1). This decline suggests that the properties now entering the surplus lines market are in areas with lower wildfire risk, reinforcing the notion that these policies would have previously been placed with admitted carriers
There is some consolation, though…
At the same time, insurance premiums followed a similar trajectory, with the average premium for new business policies decreasing by 53%, from $9,556 in 2023 to $4,476 in 2024 (Table 1). These declining insurance premiums reflect not only lower-value properties but also shifting risk profiles that more closely align with the admitted market’s traditional scope.
In other words, the insurance market is devolving and although people are still able to get “surplus” insurance, those policies are not being issued to those with heightened fire risk, a.k.a. those who need it most. Gorshunov specifically cites the exit of Allstate and State Farm from the admitted market and although the surplus market is filling their gaps, he ends by saying “long-term stability depends on restoring balance within the overall insurance system.”
Unfortunately, “long-term stability” is not likely given our collective refusal to confront or conform to the catalytic force of anthropogenic climate change. Sure, one could argue that bad policy-making is partially to blame for the failing insurance market. But there’s also clear “before and after” in the once-predictable California insurance market … and it’s the extreme weather whiplash from droughts and heatwaves to onslaughts from atmospheric rivers and back again to landscape-parching droughts. Anthropogenic climate change is bedeviling insurance markets around the Gulf of Mexico … and it’s hammering the insurance business on a global scale.
You see, climate denial isn’t really a thing in the insurance business. Nor has it been for some time. I regularly check-in on a handful of industry news websites like Insurance Journal for just that reason … I know I can rely on their research and information because they simply cannot afford to pretend it doesn’t exist. - jp
TITLE: California issues insurance warning to millions as atmospheric river nears
https://www.newsweek.com/california-issues-insurance-warning-millions-atmospheric-river-nears-2043461
EXCERPTS: California regulators are warning homeowners, especially those still recovering from the January wildfires in Los Angeles County, of an incoming atmospheric river which will increase the risk of mudslides in the Golden State.
Many homeowners in Southern California are still recovering from the devastating losses caused by the wildfires which ravaged the region for over a week in January, including the Palisades and Eaton fires. A recent study by the University of California estimates the combined insured losses to be at $75 billion, while total property and capital losses could range between $95 billion and $164 billion.
The fires put the property insurance sector under additional scrutiny, as stories of homeowners who had their policies dropped by insurers only months earlier emerged. For California regulators, who have been blamed for their role in pushing insurers out of the state in recent years, it is especially important now to protect homeowners from the possibility of yet another natural disaster that could cause millions in damages.
"Atmospheric rivers are long and relatively narrow bands of water vapor that form over an ocean and flow through the sky, transporting much of the moisture from the tropics to northern latitudes," according to PBS News. They normally cause storms characterized by heavy rains, strong winds and flooding.
One such river is expected to drench Southern California early Wednesday, threatening those same areas only recently scorched by devastating wildfires through Thursday.
The California insurance commissioner is reminding homeowners who were affected by the Los Angeles wildfires in January and who could now be hit by the impact of this weather that insurance companies are legally required to cover mudslides and debris flows "if they result from recent fires that have destabilized hillsides."
Wildfire-burnt landscapes, also known as "burn scars," leave hillsides vulnerable to flash floods and debris flows, the CDI wrote. The vegetation scorched by the blazes is not there to absorb rainfall, which instead rapidly runs off; the heat caused by wildfires can also create a water-repellent layer of soil which exacerbates this phenomenon.
TITLE: Reconstruction in Los Angeles: The enemy is in the water, air and ground
https://www.nzz.ch/english/reconstruction-in-los-angeles-means-cleaning-the-water-air-and-ground-ld.1874430
EXCERPTS: From a health perspective, urban fires are significantly more dangerous than forest fires. It's not just trees and bushes that burn, but paints, batteries, cleaning agents, plastic – the whole spectrum of human-made materials. These include toxic building materials. In the Altadena district, 90% of the houses were more than 50 years old, meaning they dated back to a time when lead-based paint and asbestos were still used as a matter of course.
This toxic mix contaminated the air during the fires. According to studies by Caltech University, high levels of toxic substances were still detectable in the air 30 kilometers south of the Altadena fire. The concentration of lead in the air was a hundred times higher than usual in the region. Inhaling lead can cause serious damage to the brain and nervous system, especially in children.
The concentration of chlorine was also 40 times the usual measured values; chlorine in the air can damage the lungs and respiratory tract. Asbestos was also released by the fires. Even a single exposure to the chemical can cause cancer years later. «You can be hundreds of miles away and still have the effects of wildfire smoke on your health,» Kari Nadeau, a physician at Harvard University who has researched the health effects of fires in California, told the Wall Street Journal.
According to experts, even the N95 masks familiar from the coronavirus pandemic do not offer sufficient protection in this case because they do not filter out particularly fine dirt particles. Experts recommend masks with activated charcoal filters, but these were sold out in many places during the fires in Los Angeles.
If the fires have damaged drinking water pipes, smoke and toxic chemicals – such as benzene – can seep into them. In the short term, this can cause nausea and vomiting, and in the long term, cancer. Theoretically, such toxic substances can build up in the water pipes for years.
Large parts of Pacific Palisades and Altadena were therefore put under a drinking water ban in mid-January. Residents in the affected areas should only use bottled water to drink, brush their teeth and cook. The ban has since been lifted in most areas.
However, the danger from soot and ash is not yet over. Remnants of heavy metals and other toxic substances have settled on the rubble and are now stirred up every time people walk through the ruins. Health experts warn residents of this invisible danger and advise against poking around in the ruins to look for their belongings. Los Angeles County has also banned the use of leaf blowers in the burn areas.
Even the residents whose houses were spared from the flames are not safe from health hazards. On the contrary, the smoke has penetrated sofas, carpets and mattresses. “All of those materials tend to soak up a lot of the gases, and then over the next month they’re going to release it back,” Paul Wennberg, who teaches environmental engineering at Caltech University, told The New York Times. Whether to dispose of everything or try to clean it is something that everyone has to decide on a case-by-case basis. “If you’re one of those few standing houses in the middle of Armageddon, I don’t know what I would do.”
TITLE: L.A.’s Clear Skies Conceal a ‘Toxic Soup’
https://www.nytimes.com/2025/03/12/well/los-angeles-fires-health.html
EXCERPTS: On a Sunday in February, a white Ford van zigzagged through the fire-ravaged neighborhood of Altadena, Calif. Ash piles lined front yards. Charred washing machines sat on bare concrete foundations.
“I can’t imagine coming back to this,” said Albert Kyi, a graduate student researcher at the University of Texas at Austin, briefly looking up from his laptop and out the van’s window.
He and his colleagues, however, were there to help people learn whether it was safe to do just that. A mast poking out from the van’s roof was sending readings on hundreds of compounds in the air to the laptop. This laboratory on wheels was so sensitive, Mr. Kyi said, that it could detect the chemicals produced by someone peeling an orange outside.
The data the team was gathering was part of a newly launched study tracking the health impacts of the Los Angeles wildfires over the next decade. By traversing the 38,000 acres that encompass the two burn zones in Altadena and the Pacific Palisades along with the surrounding region, the researchers hope to fill gaps in the data on air, soil and water quality. Already, they have found cause for concern.
The researchers were detecting high concentrations of furfural, a compound associated with burned vegetation. “There are also spikes of styrene and benzene,” Mr. Kyi added, his voice muffled by a respirator mask.
These volatile organic compounds, or VOCs, were of particular concern because at high levels, they can cause cancer. They could have been produced by melted plastic or gasoline in the burned cars sitting in driveways. In the atmosphere, they can form small particles that can irritate the lungs and increase the risk of lung disease, stroke and heart attacks.
That’s why a second vehicle behind the van was recording real-time counts of particles of pollutants so fine they can reach deep into the lungs and pass into the bloodstream or even the brain when inhaled. In the burn zone, the levels of such ultrafine particles were at some points as much as five times higher than the levels typically seen in areas unaffected by wildfires or heavy traffic.
Even houses that escaped the flames may hold hidden dangers, which is why the researchers are also testing indoor air. Smoke and ash that has worked its way into homes will continue to release volatile organic compounds for many months or more. Six months after the 2021 Marshall Fire in Boulder, Colo., some residents who returned to their homes inside or near the burn zone developed sore throats, frequent headaches and coughs.
“People are going back into their homes and living in a toxic soup,” said Michael Jerrett, an environmental health scientist at the University of California, Los Angeles who is collaborating on the new effort. Dr. Jerrett’s previous research has suggested that more than 50,000 premature deaths in California between 2008 and 2018 can be attributed to particle pollution from wildfires.
Another concern that has emerged from previous studies: The intense heat of wildfires can transform a normally benign form of chromium, a metal found in certain California soils, into a carcinogen known as hexavalent chromium, which can end up in airborne dust and ash. The researchers are awaiting their results regarding chromium levels and are also looking for so-called “forever chemicals,” which are used in refrigerants and nonstick coatings and don’t break down in the environment. These and other results will be shared as they come in on the project’s website and in peer-reviewed publications.
[A]s wildfires around the world have become more frequent and severe, they are posing a greater risk to far more people. That makes it more important than ever to know exactly what pollutants are in the smoke and where they end up.