The devastating California Camp Fire has caused such widespread damage that it has put at least one insurance company out of business.

The local Merced County Insurance Company — whose client base is overwhelmingly located in the wildfire-prone Sacramento Central Valley area — announced this week that it was closing shop because it can’t pay out the expected fire-related insurance claims.

The Camp Fire is the state’s most deadly and destructive fire on record, having destroyed almost as many structures as the subsequent 10 other worst fires in California’s history combined; thousands are without homes.

A judge on December 3 approved the company’s liquidation proceedings. Documents filed by the company show it expected $64 million in outstanding liabilities in Paradise — the town effectively wiped out by the Camp Fire. The insurance company’s assets, however, sit at just $23 million.

Individuals who need to file claims due to the fire shouldn’t be affected though — the California Insurance Guarantee Association (CIGA) will assume any outstanding claims. The CIGA was created by state law to protect policy holders in such a situation. However, there may be a limit to the amount a policyholder is able to claim, Drew Lewis, an agent at California Meridian Insurance Services, told ThinkProgress via email.


The fire “completely overwhelmed this company,” Nancy Kincaide of California’s Department of Insurance told ABC 30. “Looking at the number of claims that they would have, and it left them insolvent.”

While the company had 200 policies in Butte California, where Paradise is located, it’s unclear how many people impacted by the fire had fire insurance with the Merced County Insurance Company.

“No one can remember a time when a property management company could become insolvent,” Kincaide said, adding “We haven’t seen a company in a similar situation so I think people can be assured that everything is fine.”

As climate change causes events such as hurricanes and wildfires to become more extreme, the potential for catastrophic property damage rises in tandem. This, in turn, impacts insurance companies which have to pay out larger and larger claims the worse the damage gets. Those rising costs inevitably result in higher monthly premiums for policy holders.

According to an analysis by ThinkProgress earlier this year, the 2017 wildfires and hurricanes cost insurance companies billions of dollars.


Annual reports filed by 15 major U.S. insurers show that natural disasters last year cost the industry at least $14.5 billion. Several companies in their reports noted that climate change is a big reason why costs are skyrocketing — and they expect the trend to continue.

Despite this, property continues to be built in vulnerable areas with desirable real estate, including along coastlines and in wildfire-prone regions. As more people continue to live in these disaster-prone areas, the amount of property at risk — and the subsequent cost — will also go up.

A study released in March, for instance, showed that between 1990 and 2010, 43 percent of the new homes built across the country were in areas that are increasingly prone to wildfires.

And in January, a California regulator warned that more frequent and intense wildfires was making it harder for homeowners to get, and keep, insurance coverage. Bloomberg also reported that despite devastating wildfires in 2017, local officials are issuing permits for homes to be rebuilt without updating building codes to protect from future risks.

Residents of Paradise were allowed to return to their homes for the first time on Wednesday. For those who lost their homes, they will now face the decision of whether they should rebuild or relocate.

This story was updated to include information regarding CIGA insurance coverage limits.