"The tragic consequences of the wildfires that struck southern California in late October 2007, have given renewed attention to the partnership between private providers of disaster insurance and the federal government. In broad terms, the disruption to economic systems caused by natural disasters, such as wildfires, windstorms, earthquakes, and floods, have been handled either by the insurance and reinsurance industries and by the federal government (taxpayers). Consequently, large government outlays for disaster assistance and higher premiums for disaster insurance and reinsurance have followed the devastation caused by natural and man-made disasters. While it is too early to determine the full impact of the 2007 California wildfires on state and national property insurance markets, early estimates of $1 billion in insured property losses suggest this event will not exceed the most destructive fire in the state's history -- the 1991 Oakland fires that cost $1.7 billion. The scope of the losses is well within the demonstrated capacity of the private insurance and reinsurance markets. In California, applicants for fire coverage under the Fair Access to Insurance Requirement (FAIR) plan must live in areas of the state specifically designated by the insurance commissioner. Assistance for uninsured losses is being met through standing authorities; the need for additional federal legislation is not yet known. Federal costs to cover uninsured losses associated with the wildfires in California may require supplemental appropriations."
CRS Report for Congress, RS22747