Insurance Challenges and Economic Impacts of Wildfires on Residential Development in California: A Synthetic Review
DOI:
https://doi.org/10.54536/ajise.v4i3.5559Keywords:
California Housing Market, Climate Risk, Economic Impact, FAIR Plan, Homeowners’ Insurance, Insurance Affordability, Residential Development, Risk Management, Wild Land–Urban Interface, Wildfire RiskAbstract
The ever-increasing wildfire risk in California is putting an unprecedented burden on the markets for homeowner’s insurance and the patterns of house development, particularly in the wild land–urban interface. Insurers are increasing rates, demanding nonrenewal, or withdrawing from high-risk areas altogether, which forces many homes onto the expensive FAIR Plan. This analysis reviews five recent studies that were conducted between 2018 and 2025 and provides a synthesis of their findings. Recently conducted research sheds light on the economic impact that significant wildfires place on households, with losses reaching billions of dollars in direct damages and costs that are not covered by insurance. These market signals are frequently overridden by strong housing demand and policy gaps, despite the fact that there is some evidence to show that higher insurance rates can discourage new development in areas that are prone to fire. The findings of this research indicate that wildfire-related insurance difficulties are transforming the residential landscape of California. However, the absence of integrated land-use planning and resilient insurance solutions continues to place homeowners and developers in a precarious financial position.
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Copyright (c) 2025 Daniel Kolawole Akerele
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