A British insurance marketplace in business since 1871 will pay up to $25 million of wildfire costs in Oregon under the state’s one-of-a-kind wildfire insurance.
The policy with Lloyd’s of London calls for the state to pay the first $50 million in costs, then Lloyd’s pays the next $25 million. Anything above that would be covered by the state, along with federal assistance.
According to the Northwest Interagency Coordination Center, a logistical center for regional fires, Oregon has spent over $53 million on firefighting during the current fire season. That would trigger the insurance policy.
Jim Gersbach, spokesman for the Oregon Department of Forestry said he couldn’t confirm the NICC estimate. He outlined the policy’s amounts, limits and history.
Oregon is the only state to have a private wildfire insurance policy and has been with Lloyd’s of London since 1973.
The $3.75 million premium is split between the state and private timberland owners. Landowners pay their share through a property tax formula. The current policy is in effect through April 15, 2021.
Gersbach said the nearly half-century relationship with Lloyd’s, the state has received $99 million in claims payments against $75 million in premiums paid.
“The most recent claims ODF made under our Lloyd’s of London policy were for $25 million in 2013 and $23.2 million in 2014,” Gersbach said.
The back-to-back years of payouts led Lloyd’s of London to nearly double the premium from $2 million to $3.75 million. The deductible rose from $20 million to $50 million. The amount Lloyd’s would pay out remained at $25 million.
In the debate over keeping or dropping the coverage, supporters noted that the 2014 fires had a total cost of $75 million. Some state lawmakers argued for a state trust fund of up to $60 million to pay for fire costs directly. Supporters of continuing the policy noted that the state’s total price was over $75 million. Both sides were concerned that during tight budget years, the fund could be raided for other purposes.
After a debate in the Legislature and governor’s office, the decision was made to continue with the policy at the higher cost.
The Oregon Department of Forestry is responsible for about half the forested land in the state, approximately 16 million acres. The state is the key firefighting agency on areas controlled by the Bureau of Land Management, along with county timberlands and private property.
Lloyd’s is not an insurance company, but a corporation created by an Act of Parliament in 1871. It oversees a market underwritten by 90 syndicate members — corporations, investment funds, and wealthy individuals who are called “The Names.”
The members pool and disperse risk, while sharing in profits from the premiums from the majority of policies that go unused. Policies are sold to entities around the world.
Lloyd’s reported a $3.2 billion profit in 2019.
Lloyd’s of London Chairman Bruce Carnegie-Brown said earlier this month that the marketplace expects to pay an estimated $6.5 billion on policies because of the COVID-19 pandemic.