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In the latest episode of the Risk Market News Podcast Michael Wara, a Stanford researcher and policy expert who runs the institution's energy and wildfire policy team, argues that building a public model would take too long while the insurance market collapses in real time. Drawing lessons from Florida's experience, he advocates for a more pragmatic approach.
The urgency stems from dramatic premium increases hitting California homeowners. These aren't modest adjustments. They're market-breaking changes that threaten housing affordability statewide.
"If your insurance goes from 2K to 20K, you got a problem. And that's what's happening."
This "$20K problem" is amplified by California's unique housing market, where construction costs exceed $1,000 per square foot and continue rising. The collision between wildfire risk and extreme housing costs creates what Wara calls an unprecedented policy challenge.
While the newly approved private wildfire models will help solve the availability crisis by enabling risk-based pricing, Wara warns this creates a new problem: an affordability crisis. The solution isn't just better models, it's burning down fewer structures through community-wide mitigation efforts.
Wara points to Alabama's successful roof hardening program, where the state provides $10,000 matches for wind-resistant improvements. California has no equivalent program, despite wildfire mitigation being far more critical. He argues for door-to-door assistance programs, particularly for fixed-income residents whose unmaintained properties threaten entire neighborhoods.
The conversation also reveals a stark divide in utility wildfire management. While investor-owned utilities have dramatically reduced ignitions through public safety power shutoffs and sensitive circuit breakers, municipal utilities lag behind. This became painfully evident in the recent Los Angeles fires, where LADWP kept power on while Southern California Edison had proactively shut off electricity in high-risk areas.
Looking ahead, Wara envisions a future where insurance pricing reflects real-time community mitigation efforts, creating social pressure for wildfire preparation. But first, California must solve its immediate crisis: getting private models approved, rates properly set, and comprehensive mitigation programs launched.
📺 Listen to the full episode here
Show Notes
🔬 Guest
- Michael Wara - Stanford University Energy and Wildfire Policy
- Stanford Woods Institute for the Environment
- California Wildfire Commission
