Wildfires last year in Kern County were followed this year by the Sonoma-Napa wildfires. Now wildfires in Southern California are devastating homes, families and businesses.

First responders from multiple areas — including ours — join forces to save lives first and foremost -- then save property, where feasible.


Pleas for financial support come from all quarters. Yes — legitimate charities like Red Cross, Samaritan’s Purse, and many others should be supported. 

However, there’s an unsung “hero” who rarely, if ever, is mentioned in the media.

Insurance adjusters are on the scene to help those whose property (including automobiles) -- and lives -- are suddenly devastated. Adjusters come with their own satellite communication systems and independent power sources – plus checkbooks!

First and foremost, their role is to make advance payments to families for additional living expenses (hotel and restaurant costs) -- and to businesses for extra expenses incurred (to keep operations on-going from a temporary location). When a total business shutdown is unavoidable, adjusters pay expenses that continue even though shutdown -- including salaries of employees -- plus profits that otherwise would have been earned.

They do so without fanfare and news conferences.

Next comes needed funding for extensive debris removal. This is followed by multiple steps for reconstruction — from drafting plans and specifications to making permit filings to the bidding (or negotiation) of construction contracts – and finally to re-stocking inventory and re-purchasing destroyed equipment.

All paid by insurance.

The aggregate amounts recently paid to restore both Northern and Southern California homes and businesses — following payment of insured losses in southeastern states last year — are in multi-billions.

To be more precise, the Insurance Information Institute reports insurance payments for catastrophic claims of:

  • $ 20.9 billion in 2016;
  • $ 9 billion in the first half of 2017; plus
  • a yet unknown total for southern California’s wildfire claims ($28 billion is projected by one source).

Some have asked, how can insurance companies avoid insolvency?

The answer is: there’s a particular “magic” within the insurance system. It’s called “re-insurance” — an invisible process to most of us yet a process underway throughout the worldwide insurance system.

Re-insurance “treaties” are negotiated in advance by insurers who cede a specific segment of each risk — or groups of risks — to multiple re-insurers in a variety of methods. Where a treaty isn’t appropriate, an individual “facultative” agreement is negotiated.

The amount of risk retained by the carrier you and I see will vary with each carrier’s “appetite” for risk levels to be assumed. Risk levels ceded to others distribute each risk throughout the world in “chewable bites” to multiple insurers.

It works -- magnificently!

That’s not to say it doesn’t hurt when catastrophes occur. Shareholder dividends disappear. The insurance “soft” market shifts to “hard” with increased premiums and with underwriters declining risks they previously accepted. Popular “free” coverage-enhancement endorsements disappear or are available only by “buy-back” for an additional premium.

We in Kern County need to translate these wildfire conflagrations to our “elephant in the room” major (and overdue) risk, viz., an 8-point earthquake with shaking that lasts 120+ seconds. (This is far greater than our 1952 earthquake of 7.3 intensity and only about 20 seconds of shaking.)

This higher intensity and shaking level last occurred on the nearby San Andreas fault in the 1857 Fort Tejon event — followed by the 1906 San Francisco earthquake.

The 1906 event is rarely referred to by San Franciscans as “The Earthquake” but rather as ”The Fire.” This is because its continuous shaking triggered extensive structural fires that purportedly caused more property damage (plus loss of 3,000 lives) than did the shaking itself! Moreover, no combustible grass fields were anywhere nearby! (There’s a lesson here for us in Kern County.)

Guess what?

Standing on corners throughout San Francisco were claim adjusters with checkbooks in hand to help those in need who were insured with their carrier.

Prepare. Insure. Then enjoy a quiet night’s sleep.


John Pryor is a local risk management consultant and author of a book and multiple columns published by International Risk Management Institute in Dallas.