In late 2023, we learned about a homebuyer that had to back out of their purchase in Sisters because they were unable to secure property insurance due to the high wildfire risk. At the time, it was a bit of an anomaly and something we hadn’t yet encountered. We’ve known that in high risk areas, the annual premium might be much higher but we had not yet heard of a property being too risky for companies to insure. Fast forward a few months and it is becoming more common.
According to the Amica Insurance website, to determine if a property is eligible for coverage and to calculate the premium, they evaluate wildfire risk at two levels: Level 1 – Community, and Level 2 – Property. Both sets of calculations determine a property’s vulnerability on a scale of 1 to 10, with 1 being a low risk and 10 being a very high risk.
Oregon’s Senate Bill 82 went into effect on January 1st, 2024 and it mandates that insurers communicate property-specific information related to wildfire risk to homeowners. Insurers must notify homeowners about cancellations, non-renewals, or premium increases resulting from wildfire risk factors. Within these customer notices, insurers are being asked to provide property-specific characteristics related to wildfire risk including mitigation actions, if any, that homeowners can undertake to make their property more insurable. The law also bars insurance companies from using state wildfire hazard maps when considering homeowner’s insurance premiums. It’s partially in response to a Department of Forestry wildfire risk map that was released in June 2022 that sparked concerns among homeowners, however, for years, insurance companies have used their own proprietary risk models in underwriting and pricing for wildfire risk. Whether developing these models in house or purchasing them from consultants, insurance companies purchase a variety of data to build their own risk maps. The Oregon wildfire risk map really just made much of this information more public.
Homeowners in Oregon do have access to the FAIR plan, which serves as the insurer of last resort if a property owner cannot find insurance coverage in the standard market. The FAIR plan offers a basic policy that provides property coverage only at actual cash value. The policy typically has higher-than-average premiums and less coverage. Oregon’s FAIR plan will only pay up to $600,000 for damage or loss.
There is an excellent article posted 2/26/2024 by Alex Baumhardt in the Oregon Capital Chronicle. He includes this chart that shows that eight insurance companies make up 61% of the market. You can see what a big impact it would have if any one of them decided to retreat from Oregon like they have in California. The article states that in Central Oregon, brokers said Safeco – the state’s second largest insurer – as well as Progressive are effectively no longer writing new policies in certain ZIP codes in and around Bend, Sisters and Sunriver. One said Safeco is not writing new policies on properties over $1.5 million in Redmond, too.
If you’re considering purchasing a home in Central Oregon, it’s crucial that you’re thinking about property insurance early on in the process, especially for more rural properties. We’re happy to put you in touch with our most trusted insurance brokers. Please reach out with questions.
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