Firestorm boom


 
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AndyK

AndyK

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Chris, if this post is in bad taste please remove it.
I’m not really sure where “the line” is but wanted to do an informational post on something I’m a little familiar with.

Looking past the time of sadness for those that lost their houses and belongings this SoCal fire will have huge positive economic effects on many.
Too soon?
Maybe but it is what it is.

We had a huge economic boom when the Oakland Hills burned down about 30 or so years ago.
It lasted for about 7 years.
I’m not sure if any of you remember that but it was pretty big fire and for us that were builders and suppliers it was good times.
There were contractors salesmen and scammers from all over the country getting in on the rebuilding of all those nice houses.
There were profits 2-3 times the normal amount on the fair side and even higher on the steep side.
Oaklands Fire Storm is a very small fraction of what is going on in the Southland right now.

This will be a time of opportunity.
Everything will go into the stratosphere price wise to fulfill the needs of replacing these expensive residences.
Even sub leasing empty land will make people rich.
Contractors and salesmen will do ok too.
This is the time for the kids to get their contractor license classes done.

My wife does commercial insurance for a brokerage company.
I’m sure they will have a presence there one way or another.
 
I remember the Plainfield tornado that hit in 1990. It was a F5 and the biggest to hit the Chicago area.
Our shop was a few miles from ground zero. We were one of the first " local " Carpenter contractors on site.
A lot of fly by nite " storm chasers" filled in the rest, mostly from out of state.
The housing boom was still in full effect so most union shops were too busy or didn't want to deal with insurance claims.
I did a few just for builders that we worked for. We knew the building inspector and worked with him to get the best for the homeowners.
It was a humbling experience working for people that lost almost everything, but they would give you the shirt off they're back just to thank us.
 
AndyK said:
Chris, if this post is in bad taste please remove it.
I’m not really sure where “the line” is but wanted to do an informational post on something I’m a little familiar with.

Looking past the time of sadness for those that lost their houses and belongings this SoCal fire will have huge positive economic effects on many.
Too soon?
Maybe but it is what it is.

We had a huge economic boom when the Oakland Hills burned down about 30 or so years ago.
It lasted for about 7 years.
I’m not sure if any of you remember that but it was pretty big fire and for us that were builders and suppliers it was good times.
There were contractors salesmen and scammers from all over the country getting in on the rebuilding of all those nice houses.
There were profits 2-3 times the normal amount on the fair side and even higher on the steep side.
Oaklands Fire Storm is a very small fraction of what is going on in the Southland right now.

This will be a time of opportunity.
Everything will go into the stratosphere price wise to fulfill the needs of replacing these expensive residences.
Even sub leasing empty land will make people rich.
Contractors and salesmen will do ok too.
This is the time for the kids to get their contractor license classes done.

My wife does commercial insurance for a brokerage company.
I’m sure they will have a presence there one way or another.
Click to expand...
There is a price-gouging law in CA that limits price increases to 10% on things like pet care, rental housing, medical care. BUT...here's what happens. The landlord cannot make you pay more than a 10% upcharge for renting a hotel room, for instance...but you can offer to pay more and the law doesn't pertain to that. 100 people may get into a bidding war over an item that is for sale and it goes to the highest bidder.

Our family physician's father owned a business that was destroyed in the fire. He isn't sure if he will rebuild because it will take a decade or more for the community to rebuild and to re-establish a customer base. I think rebuilding will be a slow process.
 
Price gouging was rampant on building supplies through and after Covid too, my cabinetmaker buddy said his costs were up 30-50% and those have not returned to anything like they were. This sort of thing simply makes me sick and sad!
 
The biggest problem for rebuilding is, unfortunately, the bureaucracy and permitting in California. I remember not too long ago when Bill Maher celebrated finally getting everything done to get approval to add some solar panels to his home. It only took 3 years ! ! ! And, keep in mind that going solar is something that they really, really want in The Golden State. Just imagine what it's going to be like when those same bureaucrats are being aske to approve things that they hate . . .
 
Agreed there will be a construction boom. I do find it "interesting" how these LA Fires (Eaton & Palisades) got so much press.

There have been several fires recently considerably more destructive (Dixie July 2021, Lightning Complex & North Complex August 2020 and who can forget the Camp Fire that wiped the town of Paradise from the map and killed almost 100 people in November 2018

Lets face it, the Camp Fire got half at most the press as the two LA Fires. But as Andy points out, there will be a boom that follows. What will be interesting to see, is the percentage of fire insured home vs uninsured homes. And even more interesting to see will be if the Federal Government ends up providing substantially greater assistance for the LA Fires than the other fires
 
I had a friend who was a great story teller. Of the many times I would stop him in the middle of a story and ask, "Is that really true?", his simple answer was, "Just pick the parts you like."

Just pick the parts you like. 😉
 
ChuckO said:
I do find it "interesting" how these LA Fires (Eaton & Palisades) got so much press.
Click to expand...
Not surprising. Even though the human tragedy is similar between LA and Paradise, when the second largest city in America burns, it's going to generate more media attention. That's just the nature of news and human attention to things. Few ever heard of Paradise or have a connection to it, but everyone knows LA and most have some connection to it through friends, family, work, entertainment, vacations, tourism, etc.

I agree there will be much economic activity as a result of these fires, but not an ideal way to achieve it. We will see soaring prices, lack of materials, lack of skilled labor, lots of people hurting. I've got neighbors who live in rebuilt homes after the 2017 Tubbs Fire and they're still not emotionally healed after what happened here.

And you know, you can substitute "hurricane" or "tornado" or "flood" in any other part of the country and end up with the same result. People hurting and trying to put their lives back together. So sad all around.
 
ChuckO said:
Agreed there will be a construction boom. I do find it "interesting" how these LA Fires (Eaton & Palisades) got so much press.

There have been several fires recently considerably more destructive (Dixie July 2021, Lightning Complex & North Complex August 2020 and who can forget the Camp Fire that wiped the town of Paradise from the map and killed almost 100 people in November 2018

Lets face it, the Camp Fire got half at most the press as the two LA Fires. But as Andy points out, there will be a boom that follows. What will be interesting to see, is the percentage of fire insured home vs uninsured homes. And even more interesting to see will be if the Federal Government ends up providing substantially greater assistance for the LA Fires than the other fires
Click to expand...

Or to victims of Helene and Milton . . .
 
Ed P said:
Of the major home insurers in California in 2023, Farmers Insurance leads the pack with close to a 50% claim denial rate.

www.newsweek.com

California home insurers that denied the most claims

Some of the biggest insurers in California had the highest number of national claim denials in 2023, according to Weiss Ratings.
www.newsweek.com www.newsweek.com
Click to expand...
They may deny claims but I guarantee the rest of the country (between these fires and the floods and hurricanes), they are not gonna hesitate to rake the rest of the country over the coals.
 
Ed P said:
Of the major home insurers in California in 2023, Farmers Insurance leads the pack with close to a 50% claim denial rate.

www.newsweek.com

California home insurers that denied the most claims

Some of the biggest insurers in California had the highest number of national claim denials in 2023, according to Weiss Ratings.
www.newsweek.com www.newsweek.com
Click to expand...


"Denied claims are normally due to being lower than the deductible or non- covered losses and perils such as flooding, landslide, maintenance rather than a direct accidental loss," she told Newsweek."

It would be interesting to see the raw percentage broken down along the lines of:
50% claim denial caused by

yy% claim less than deductible
zz% non-covered losses ( and further broken down by )
zzA% Flood
zzB% landslide
zzC% maintenance
zzD% etc
 
DanHoo said:
I agree lots of mis info. Not sure about the alleged "facts" on that site.
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Amen to that. December Press Release from Commissioner Lara

Commissioner Lara issues landmark regulation to expand insurance access for Californians amid growing climate risks

www.insurance.ca.gov www.insurance.ca.gov

In summary:

What it means: Insurance companies must increase coverage in wildfire-prone regions, ensuring they write policies for at least 85% of their statewide market share, with annual increases until the threshold is met.

More coverage for Californians in wildfire-distressed areas: All homeowners insurance companies must increase the writing of comprehensive policies in wildfire distressed areas equivalent to no less than 85% of their statewide market share, whereas there is no current legal requirement today for insurers to provide any coverage in high-risk areas. Companies will have to continue to increase by 5% every two years until they meet this threshold.

Cost caps: The regulation treats reinsurance like other insurance company expenses allowed under Prop. 103 today — such as claims handling or agent commissions — by establishing an industry-wide standard cost of reinsurance and capping the amount of reinsurance costs that can be charged to consumers. Companies spending more than the industry standard cannot pass these costs onto their policyholders.

Greater efficiency: Establishing a standard cost based on an index of what insurance companies spend encourages them to be efficient and compete for the best price for reinsurance, so consumers get the best value.

California-only costs: The regulation limits costs to California-only, so consumers do not pay for the cost of Gulf Coast hurricanes or Midwest windstorms.

Reliable rates: The regulation goes hand-in-hand with forward-looking wildfire catastrophe models that can better predict future rates. Under the current system of historical data, insurance consumers are paying balloon premiums and rate spikes after major wildfires, without increased availability.

Prevents “model-shopping”: “Model shopping” describes when insurance companies choose one model that produces higher rates for consumers, and another that lowers their reinsurance costs. To prevent model shopping, the regulation requires insurance companies utilize the same model for both. This promotes more consistent approaches to assessing risks, and balances the scales for consumers.

Largest insurance reform in 30 years: The new regulation is the final major element of the largest insurance reform in 30 years for California. The Department held multiple workshops and hearings in 2024, including a meeting on December 5 which was attended by more than 500 people and received 70 verbal and written comments which helped shape this regulation. Commissioner Lara has met with tens of thousands of Californians in all 58 counties across the state since taking office as well as testifying at four legislative briefings about his Sustainable Insurance Strategy over the past year.
Click to expand...

Laura said that Insurance Companies have to:

Insurance companies must increase coverage in wildfire-prone regions, ensuring they write policies for at least 85% of their statewide market share, with annual increases until the threshold is met. All homeowners insurance companies must increase the writing of comprehensive policies in wildfire distressed areas equivalent to no less than 85% of their statewide market share, whereas there is no current legal requirement today for insurers to provide any coverage in high-risk areas. Companies will have to continue to increase by 5% every two years until they meet this threshold

Insurance Companies said:

Bye bye California
 
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