Fire insurance for some US homes soars to $270k due to climate change

Mr Peter Mac was closing the sale of a home in the Hollywood Hills, a four-bedroom, five-bath estate with an infinity pool perched above the lights of Los Angeles.

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The new house had been on the market for two years, with the price tumbling to US$25.6 million from an original listing of US$48 million.

But before the final sign-off in February, Mr Mac presented the buyer with a fire insurance quote: US$200,000 (S$270,00) a year.

"She almost fell off her chair," said Mr Mac, a broker with The Agency. "She wanted to renegotiate."

California's property insurance crisis is shaking up real estate in some of the most expensive housing markets in the US. Insurers are charging sky-high premiums or abandoning coverage completely in exclusive enclaves such as BelAir, Montecito, Beverly Hills and Napa Valley wine country.

It is part of a nationwide trend driven by climate change, and the fear is that California could become the next Florida. Home owners' insurance in hurricane-prone Florida costs over three times the national average, and more than a dozen insurance companies have stopped writing home policies there. Average premiums in Florida have gone up more than 100 per cent in three years.

In California, the big worry is not a Category 5 hurricane. It is wildfires devouring multimillion-dollar hillside estates.

State Farm General Insurance, California's biggest insurer by market share, announced in March that it was discontinuing 72,000 policies, including 30,000 homes, ahead of this year's wildfire season. Nearly 70 per cent of the houses are in ZIP codes where the median sale price was US$1 million or higher in 2023.

The cancellations included 67 per cent of State Farm policies in Bel-Air's 90077 ZIP code, 69 per cent in the Pacific Palisades' 90272 and 46 per cent in Beverly Hills' famous 90210, according to a filing.

In Montecito, whose residents include Oprah Winfrey and the Duke and Duchess of Sussex - aka Harry and Meghan - State Farm axed 28 per cent of its policies.

Mr John Morris is one affluent homeowner feeling the heat.