Guidewire Backs California's Shift on Climate and Insurance Pricing

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Guidewire, which provides software and property risk data, casualty risk data, and hazard risk scoring to 540 insurers in 40 countries, has issued the industry's first public statement in response to the recent proposal to loosen restriction on climate-related risk considerations and pricing in California, the nation’s largest P&C market with more than $11 billion in homeowners and fire insurance premiums written.

"California's insurance crisis calls for collaboration between government regulators and insurers to create a sustainable insurance market – one that provides consumers protection and choice,” said Guidewire CEO Mike Rosenbaum. “This is particularly critical in a market grappling with the impacts of climate change and severe wildfire risk. We applaud the actions of California Governor Gavin Newsom and Insurance Commissioner Ricardo Lara in their efforts to adapt regulations to support a more viable insurance market."

According to Guidewire's HazardHub data, California is the state most prone to wildfire risk - with an average of 8,273 wildfires per year and 933,000 acres burned yearly over the last decade.

“Despite current challenges, the state of California is highly insurable. Guidewire HazardHub data shows that more than 90% of the property damage in California is concentrated in just 10% of the state which rates as an F for wildfire risk. Homes in these areas are 50 times more likely to suffer wildfire damage. With the right regulatory structure and the right data and risk analytics, insurers can more accurately identify, price, and account for risk at the individual property level and the portfolio level,” continued Rosenbaum.

“These proposals to permit insurers to price catastrophe risk with forward-looking projections will be a game changer in improving market conditions. The current requirements that rely solely on historical data are outdated in a time when weather and natural catastrophe events are changing rapidly. The technology and data exist to examine over thirty data elements correlated with higher wildfire risk – and to map and define that risk at the exact property address level” added Roger Arnemann, General Manager & SVP at Guidewire Analytics."

In a company blog, Arnemann went on to outline what Guidewire see's as an opportunity for Guidewire and insurers, spurred by the regulatory changes in play. "Insurers need to prepare for these potential regulatory changes. In particular, they need to be ready with the technology required to identify the most insurable properties in these state-defined high-risk areas. There will be a land rush for the best customers in high-risk areas. The insurers who are prepared ahead of time will be in quite an advantageous position competitively. We are confident that [Guidewire's] HazardHub can provide insurers with this comprehensive data and empower them to assess and underwrite property risk more profitably in the state – as well as elsewhere in the U.S.