Experts issue warning on concerning trend putting huge strain on US homeowners: 'Critical conversations we need to be having right now'

Wildfires in the western U.S. are causing immense strain on the insurance industry as well as homeowners.

What's happening?

ABC News reported that the data research company Cotality issued its yearly wildfire risk report, outlining the risk of wildfires in certain areas of the U.S. and the state of the wildfire insurance industry.

According to the report, over 2.6 million homes in 14 Western states currently face either a moderate or greater wildfire risk. Nearly half of those homes are at very high risk, and over 1.2 million homes located in California are at moderate or greater risk. The estimated total cost to replace all these homes if a wildfire were to destroy them is $1.3 trillion.

The result of all this risk is that the insurance industry is becoming strained, and people in these areas are facing more challenges to homeownership, including rising reconstruction costs, increased insurance costs, and, more often, a complete loss of insurance coverage after damaging wildfires.

Tom Larsen, Cotality's assistant VP of product marketing for insurance solutions, explained, per ABC News: "Building with wildfires in mind and introducing mitigation measures for where we have already built is one of the critical conversations we need to be having right now."

Why is this report concerning?

Rising insurance rates and the loss of coverage are an increasing problem that makes owning a home riskier and less affordable. The Treasury Department released a report this year examining insurance data trends from 2018 to 2022 and found that insurers' costs were greater in regions with a higher anticipated risk loss from extreme weather events, as the number and severity of insurance claims increased.

Meanwhile, the average cost of home insurance rose more than 8% faster than the rate of inflation, as private insurers began raising premiums in areas prone to wildfires and reducing coverage.

As human activities, such as the use of dirty energy, continue to release heat-trapping gases into the planet's atmosphere, already extreme weather events will become further exacerbated, which means more damaging wildfires and other natural disasters will occur. As they do, more insurers will raise rates or discontinue coverage for areas prone to such disasters, resulting in homeowners struggling to decide whether to move or simply leave their homes uninsured.

What's being done about wildfires?

The U.S. government announced Sept. 15 that it was taking steps to strengthen and modernize the country's wildfire response and prevention system. 

Additionally, the Department of Homeland Security Science and Technology Directorate, along with other agencies, continues to improve existing wildfire-fighting technology and develop new technologies to combat the increasing occurrence of wildfires.

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