Governor's Call For State-run Fire Insurance Program Could Spur Wildfire Debate

SANTA FE — Amid a string of bigger and more destructive wildfires, Gov. Michelle Lujan Grisham called this week for the creation of a state-run fire insurance program for New Mexicans struggling to obtain an insurance policy.

Several lawmakers have also indicated their own plans to address the issue, as New Mexico has recorded its two largest wildfires in state history in the last three years — both in 2022.

During her State of the State Address, Lujan Grisham said wildfires spurred by climate change have tested New Mexicans' resilience and patience.

"As if the fires themselves aren't difficult enough, getting insurance protection is becoming impossible, either because it's simply no longer available or exorbitantly expensive," the governor said during her speech.

The state-sponsored fire insurance program she's proposing during this year's 60-day legislative session would be a risk-based model intended to protect families and their homes.

It would function similarly to the state Workers' Compensation Administration, with initial state subsidies required to establish adequate funding reserves, Lujan Grisham spokesman Michael Coleman said.

The amount of money required to launch the program has not yet been determined, he added.

"The governor believes this is a critical initiative, because without accessible fire insurance, entire communities could be wiped out without recourse," Coleman told the Journal.

The Calf Canyon/Hermits Peak wildfire that burned more than 350,000 acres in northern New Mexico in 2022, and the South Fork and Salt wildfires that burned more than 1,400 structures in the Ruidoso area last summer both prompted federal disaster declarations.

Fires fanning policy changes

In the Ruidoso area, insurers are not writing new policies after the devastating wildfires and subsequent flooding of last year, said Rep. Harlan Vincent, R-Glencoe.

He said the issue has caused a ripple effect in the local economy, impacting not only homeowners but local real estate agents, too.

"My folks still can't come home," Vincent told the Journal. "They have nothing to come home to."

The two-term legislator, the former chief of the Ruidoso Fire Department, is working with Senate Majority Leader Peter Wirth, D-Santa Fe, on changes to an existing "last resort" state property insurance pool.

That insurance pool is called the Fair Access to Insurance Requirements, or FAIR plan, and was created in 1969.

However, the plan currently has maximum coverage limits of $350,000 for a residential property and $1 million for a commercial property.

Wirth said he plans to file legislation increasing the limits — to as high as $2 million for residential properties — and appropriating money to bolster the plan.

"If you can't get any insurance, this is the place to go," he said during a recent interview.

"With fire becoming the new norm, I think more and more we're going to need to look at insurance and the way we build houses," Wirth said.

The governor's proposed insurance program would function independently of the existing plan.

A Lujan Grisham spokeswoman said the proposed state-run fire insurance program would have higher limits and broader policy coverage.

State pursues other fire-focused efforts

New Mexico is not alone in grappling with the intersection between natural disasters and the insurance industry, as destructive wildfires have prompted some insurance companies to stop approving new policies in California and other states.

But California recently approved a rule requiring insurers to continue offering coverage in high-risk areas if they want to do business in the state.

New Mexico has also launched court battles against insurers over their handling of natural disasters.

The state Office of the Superintendent of Insurance filed a lawsuit last year against State Farm, the state's largest insurer, accusing the company of improperly denying some loss claims for damages incurred by two large fires that burned in the Ruidoso area.

But the state agency lost in court when a judge ruled the insurance company did not have to comply with a state order requiring insurers to pay $5,000 in living expenses to individuals forced to evacuate their homes due to the fires.

Meanwhile, the state has also launched other fire prevention efforts, and lawmakers in 2023 passed a bill banning prescribed burns when a red-flag warning for dangerous fire conditions is in effect.

But Vincent said he believes U.S. Forest Service officials have also contributed to the problem.

"They're not doing a good job of managing our forests," said Vincent, who added targeted logging operations could reduce fuel loads in some densely forested areas.

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