This state senator is pitching federal fire insurance program for Arizona homeowners

Insurance companies are raising premiums on homeowners in parts of Arizona, and in some cases pulling out of markets entirely, citing increased wildfire risks.

Sen. Mark Finchem (R-Prescott) argues the federal government is to blame, claiming mismanagement of federal lands is what’s led to greater wildfire risk.

“I will put a fine point on it; it is the federal government that created the problem. The federal government is going to have to step up and help solve the problem,” Finchem said in a recent Senate committee hearing.

To that end, Finchem suggests the federal government create a national fire insurance program to protect all homeowners from wildfires.

Finchem also suggested in a statement that the federal government should give Arizona federal land, something many Republican lawmakers frequently advocate for.

“What we learned at the committee hearing shines light on the crucial need for the current administration to release Arizona's land from under their control, back under the control of our state government, so we can fix the issue and put our people first,” Finchem wrote.

Sen. Priya Sundareshan (D-Tucson) said her caucus doesn’t agree with Finchem’s assertion that the federal government is the one to blame for the insurance crisis Arizona faces.

Federal protections on things like endangered animals limit the timber industry on federal forestland. One ongoing debate in Arizona is the restrictions federal protections have on the mining industry.

Lawmakers and speakers discussed the federal National Flood Insurance Program managed by the Federal Emergency Management Agency. Finchem referenced the NFIP in his statement:

“A pathway towards a solution has been proposed, suggesting the federal government supply fire insurance similar to flood insurance,” he wrote.

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One speaker who told Finchem he was supportive of the federal insurance program idea was Tom Farley, who represents Arizona Realtors.

Farley argued that homeowners are suffering because federal forests aren’t being maintained and when a home butts up against high-risk federal land, there’s nothing the property owner can do to mitigate their fire risk.

“You can do everything to your property, and you’re still going to get nonrenewed,” Farley said.

Marcus Osborn, senior government relations director for a law firm called Kutak Rock, said the devil is in the details with a federal insurance program.

One option is a reinsurance program. Under that idea, the current insurance structure would still exist, but the federal government would step in, in the event of a devastating wildfire, and pay for a portion of the damage.

For example, if a $7 billion fire hit the Flagstaff area, and an reinsurance program had established a coverage cap of $5 billion, then normal insurance companies would pay for that much of the damages, and the federal government would pay for the other $2 billion.

Reinsurance exists as a concept now between insurance companies who agree to cover one another.

The existing federal flood insurance program is different. It insures individuals for floods only, up to a certain value. It doesn’t necessarily insure the entire value of a home.

Alternative solutions proposed to help homeowners have not succeeded at the Capitol this year.

One example is a bill sponsored by Rep. David Marshall (R-Snowflake) that would have required insurance companies to take certain factors into account before choosing not to renew homeowners insurance policies, but that legislation died on Monday.