Modern glass buildings including the Swiss Re Gherkin in London's Financial District.

California Wildfires Viewed as a Major Peril by Reinsurers

California’s Department of Insurance has taken steps to help rural residents in the Golden State from losing their homeowner’s coverage.

Insurer refusals to renew homeowner insurance spiked after the 2017 fire season, rates for homes in wildfire zones continue to climb, and experts say the problem is not easy to reverse.

Some of California’s insurance woes stem from reinsurance companies headquartered in locales such as Zurich and Bermuda. These reinsurers provide insurance to better known primary insurance carriers, such as Farmers and State Farm. 

The wildfires that ravaged California in 2017 and 2018 caused $25 billion in damage, with billions falling on reinsurers to cover because they overlooked wildfires as significant calamities.

According to news reports, Zurich-based Swiss Re, the world’s largest reinsurer, in annual premiums — lost $775 million on California wildfires in 2017 and 2018. Bermuda-based Everest Re took a $450 million loss on the Camp and Woolsey fires in 2018.

Since then, many reinsurance companies have scaled back their coverage in California or raising the rates they charge primary carriers. According to a report last year by S&P Global Ratings, some reinsurers increased prices as much as 70%.

The Department of Insurance does not include the cost of reinsurance in its rate-making calculations, putting primary carriers in a bind. They must seek the department’s approval for rate hikes on homeowners. So, the primary carriers are reducing the number of policies they underwrite.

“You have to (reduce) your risk profile to match your revenue,” Rex Frazier of the Personal Insurance Federation of California, told the Sacramento Bee.

Frazier’s, whose association lobbies for some of the biggest primary insurers, said reinsurance companies are now scrutinizing wildfire risks more closely than ever.

“It used to be, ‘Tell me about your Florida hurricane risk.’ Now it’s, ‘Please show me your modeled losses for your California wildfire risk,'” Frazier told the newspaper.

Read more about reinsurer’s role in the insurance crisis in California wildfire country at

Photo shows The Gherkin in London’s financial district home to Swiss Re in the U.K. Editorial credit: donsimon /