Income and Insurability as Factors in Wildfire Risk

Abstract

The increasing frequency of destructive wildfire incidents in the United States, particularly in the West, is well-documented, and the key causal variables are increasingly well understood. Among stakeholders with heightened concerns about risks from destructive wildfire are insurance companies and the homeowners they insure. The cancellation and nonrenewal of insurance due to wildfire risk has received media attention in the wake of major wildfire seasons, particularly in California. However, less attention has been directed to wildfire-related risks borne by lower-income policy holders, specifically. For example, the probability of maintaining or replacing an at-risk policy increases when a homeowner invests in fire protection measures. However, these investments are comparatively costly for lower-income homeowners. The present research aims to identify regions in the lower 48 states where moderate and high wildfire risk, lower income, and insurability are coterminous risks. The concentration of at-risk homes in counties with comparatively high wildfire hazard potential and comparatively higher poverty rates are considered. This paper also considers how the concentrated market share of insurance underwriting may pose a risk to lower income homeowners, considering the overlap between highly concentrated insurance markets and states with high wildfire risk and higher poverty rates.