Nevada to address insurance cancellations over wildfire risk

April Corbin Girnus and Jeniffer Solis

(Nevada Current) Thousands of homeowners in Nevada have seen their insurance policies canceled or not-renewed due to wildfire risk, prompting state lawmakers to warn that “a crisis is brewing” and considering ways to combat it.

Republican Assemblymember Jill Dickman from Washoe County believes Nevada should replicate a state-managed private insurance program already in place in 34 states and the District of Columbia.

Dickman is sponsoring Assembly Bill 437, which would establish a Fair Access to Insurance Requirements (FAIR) Plan – an insurance program of last resort for homeowners who cannot reasonably obtain coverage through standard insurance providers. Her bill is one of two bills making its way through the Nevada State Legislature focused on home insurance availability amid increasing wildfire risk.

FAIR plans, which have been around since the 1960s, provide coverage for homeowners who cannot find policies on the private market. The plans are managed by the state governments, but they are backed financially by a pool of the private insurers.

California’s FAIR plan has received the most public attention and criticism because of its size and the prevalence of wildfires in the state, but Dickman told the committee that Nevada’s FAIR program would not look like its western neighbor’s.

Dickman wants Nevada’s FAIR plan to remain “a true market of last resort” that does not compete with the private market. To ensure that, she has drafted a conceptual amendment specifying that homeowners be denied by three standard insurance companies before being eligible for Nevada FAIR. They must also attempt to secure non-FAIR coverage every two years.

Homeowners would also be required to undergo a wildfire risk assessment and implement its recommendations.

The Nevada Fire Chiefs Association worked with Dickman on AB437. Representatives from the group emphasized the need to mitigate fire risk.

Elko County Fire Chief Matthew Petersen estimated that once a week he receives a phone call from someone asking for help because their home insurance policy is getting canceled.

Dickman has also capped what FAIR will insure – $5 million for commercial properties and $750,000 for residential properties.

She acknowledged those limits are relatively low considering the cost of housing in many parts of the state. The median price of a home in Washoe County is currently around $550,000.

“We have to start somewhere,” said Dickman. “We’ve been talking about this, and talking about this, and talking about it, and there’s never any action taken. We’re looking for the perfect plan.”

Nevada, she argued, cannot afford to delay taking legislative action knowing it will also take time to implement any program. She noted Colorado passed legislation to create a FAIR plan in 2023 and is only beginning to offer coverage this year.

“If we put it off for two years, it’ll be another two years, and by then we’ll be in a crisis,” Dickman added.

In 2023, 481 homeowners insurance policies were canceled or non-renewed due to wildfire risk — an 82% increase compared to the previous year, according to the Nevada Division of Insurance. That same year, nearly 5,000 applications for homeowners insurance were declined due to wildfire risk — a 104.8% increase over the previous year.

Cadence Matijevich, a lobbyist for Washoe County, said there is a misguided assumption that wildfire insurance is “an issue of the 1%” involving multimillion homes in Incline Village.

“That’s not true,” she said. “We’ve heard heartbreaking stories from senior citizens who’ve lived in homes for 50 years and are at risk of losing their homes because they couldn’t get property insurance.”

The American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies oppose the FAIR plan proposal.

APCIA in a letter of opposition wrote that a FAIR plan “fails to address the underlying issues that result in less affordable or available coverage.”

Instead, the industry is supporting a separate bill meant to give them more flexibility in the types of insurance plans they can offer Nevadans.

Regulatory sandbox

Republican Assemblymember P.K. O’Neill is sponsoring Assembly Bill 376, which would create for insurance companies what’s known as a “regulatory sandbox” that allows them to test out new types of plans that don’t fit under current state regulations. The sandbox program would exist for 4 years, after which the Nevada Division of Insurance would have to submit to the Legislature a report with information and recommendations.

Nevada Insurance Commissioner Scott Kipper, who presented the bill with O’Neill, told the committee the idea is to incentivize companies to create “innovative products” by giving them “some flexibility to generate revenue that is needed to manage risk.”

O’Neill, who represents Carson City and parts of Storey and Washoe counties, said his bill uses model language drafted by the National Council of Insurance Legislators.

AB376 doesn’t mandate any type of product be tested but does provide some potential options, including removing wildfire coverage from the standard homeowners policies and offering it as a standalone package.

The bill received a mixed reaction from committee members. Democratic Assemblywoman Sandra Jauregui said she is supportive of regulatory sandboxes to spur innovation. She pointed out that the Legislature passed one for the fintech industry in 2023.

Democratic Assemblymember Max Carter expressed concern that insurance companies might be attempting to free themselves of having to cover wildfire damage. “Are we turning everyone loose and letting the fires burn down our houses?”

That concern was echoed by the Consumer Federation of America, which opposes the bill.

“This is a shoot first, ask questions later approach that is certain to increase premiums and put consumer financial security at risk,” the organization wrote in a letter of opposition.

The Assembly Commerce and Labor Committee has taken no action on either bill.

Dickman’s FAIR plan bill must clear the committee by Friday or it will be considered dead.

O’Neill’s regulatory sandbox bill is exempt from legislative deadlines, meaning it has more time to advance. Kipper told the committee he is working on ways to get the bill’s fiscal note ($237,000 over the upcoming biennium) removed.

O’Neill and Dickman’s bills are not mutually exclusive, and the latter assemblymember is listed as one of several sponsors on the former’s bill.

Washoe County testified in support of both bills.

Risk in Nevada

Nearly one-fifth of Nevada’s land area has been burned by wildfire in the past 40 years, landing the state fifth in the nation for land area burned by wildfires.

A new study by the Lied Center for Real Estate at the University of Nevada, Las Vegas found that more than 18% of Nevada’s land mass has been torched by wildfire from 1984 through 2024.

Northern Nevada has experienced a significantly larger number and total acres burned by wildfires than Southern Nevada, due to the differences in climate, terrain, and the presence of forested land.

Rural counties in Northern Nevada were the most affected by wildfires in the state. Elko County had the largest percentage of land area burned by wildfire at 41%, followed by Humboldt at 39%, according to the study.

One fourth of Washoe County’s land area has been burdened by wildfires. Carson City, the state’s capital, also experienced noticeable burns with 15% of its land impacted by wildfire.

In Lincoln County, a rural county in Southern Nevada, about 18% of land mass has been burned by wildfires since 1984.

In Clark County, Nevada’s most populous county, only about 5% of its total land burned by wild fires in the past 40 years.

The Lied Center’s study was based on Monitoring Trends in Burn Severity wildfire data, a joint program administered by the United States Geological Survey and the United States Forest Service to map wildfires across the country.

Lied Center for Real Estate Research Director Nicholas Irwin, who co-authored the study, told the Current that as more people move into forested areas wildfires are likely to become much more economically destructive moving forward.

“Coupled with the climate change we’re seeing, longer drought, increased temperatures— that’s going to make wildfire seasons a lot a lot worse,” he said.

While other states have experienced more economically destructive wildfires, the number of wildfires impacting infrastructure in Nevada has increased in recent years.

In September, the Davis Fire broke out in Davis Creek Regional Park, about 20 miles south of Reno. The wind-driven fire rapidly burned through 5,824 acres of private, state, and federal lands, driving the evacuation of about 20,000 people from residential neighborhoods and businesses. The fire ultimately destroyed two commercial buildings and 14 residences.

Nevada’s fire season, once limited to late summer and early fall, now spans nearly the entire calendar year.

High wildfire risk makes areas less attractive for developers, impacting housing development, said Irwin. Rural areas, which already deal with high construction cost and other barriers to development, could be disproportionately impacted

As Dickman put it during the AB437 hearing: “You can’t sell a home you can’t insure.”

These concerns are contributing to this year’s push for legislative action.

Beyond the proposals currently being considered, Irwin said Nevada could take a more proactive role in monitoring wildfire risk as other states do. In Colorado, the Colorado State Forest Service maps wildfires in an effort to inform homeowners and business owners of the impending risk for their location based on fire conditions.

“It’s very costly, but it is very informative, and there’s research out there to suggest homeowners respond to that information,” Irwin said. “Knowing the relative risk of that land is going to be really important so we can think about how to build strong and resilient homes that won’t be at risk for future wildfires.”