It’s peak wildfire season in California.

In recent weeks electricity companies in the Golden State shut off power to millions of people in an attempt to prevent sparks from overhead power lines lighting brush fires on ground that was tinder-box dry after the state’s long, hot summer.

So far, 2019 has seen far fewer wildfires than the recent average. However, the years of 2015 to 2018 were particularly devastating, and this trend is only likely to worsen with climate change.

For residents struggling to rebuild their lives after having their homes destroyed, they must confront a further challenge: the state’s fire insurance industry.

Following the 2017 fire season, the number of homeowner policies in ZIP codes affected by those fires that insurers refused to renew increased by 10% from 2016 to 2018.

Even for those homes that have not suffered a loss, carriers have either stopped writing altogether or demanded extraordinary premium increases. The LA Times quotes one homeowner in a high-risk area whose annual premium increased from US$4,200 to US$22,000.

Homeowners are having to resort in increasing numbers to finding coverage through the California FAIR Plan, the state’s industry-funded fire insurer of last resort, and even surplus lines insurers including Lloyd’s. New FAIR policies increased 177% between 2015 and 2018.

Surplus lines insurers are not permitted to sell residential insurance unless a customer has been rejected by at least three conventional insurers. Nonetheless, although such insurers still only account for a small proportion of homeowner business, they have seen a noticeable uptick in business to 2.3% of total premiums, after averaging 1.4 to 1.8% over the last five years.

It is difficult to disagree with insurers when they say climate change has affected the industry. However, critics argue that insurers’ price setting mechanisms are opaque, and that it is too easy for insurers to drop customers. The United Policyholders consumer advocacy group has called the issue a crisis, and is calling on the Department of Insurance to step up its oversight. Insurers are already facing a new normal in terms of the severity of wildfires. It seems likely they will soon be facing more aggressive regulation too.