Oregon Dept. of Forestry decides not to renew costly firefighting insurance policy with Lloyd’s of London
SALEM, Ore. (KTVZ) – After much consideration, Oregon’s state forester said Friday he has decided to not renew the Department of Forestry’s firefighting insurance policy with Lloyd’s of London and its multi-million dollar premium for the 2023-2024 policy year.
This policy was first obtained prior to the 1973 fire season to try to mitigate the impacts of wildfire suppression costs for Oregonians. However, over the past decade, longer, more complex, and costlier fire seasons have led to higher premiums and deductibles that lowered the intended mitigating effects of the policy.
The decision to not renew the policy has no impact on ODF’s fire season readiness or firefighting capacity, ODF said.
“Oregonians can rest assured that dissolving this policy does not mean a lack of protection on the lands we’re responsible for,” State Forester Cal Mukumoto said. "ODF stands ready, as we do heading into every fire season, to strategically use all resources at our disposal to protect Oregonians and their natural resources."
Mukumoto’s decision comes on the heels of a special meeting of the Emergency Fire Cost Committee (EFCC) on April 3, during which the final terms of the policy were presented. Under state law, the EFCC is charged with overseeing the Oregon Forest Land Protection Fund (OFLPF), which is privately funded by landowner assessments and a portion of harvest tax revenues. The fund is used to offset fire cost impacts to the state’s General Fund.
The OFLPF is intended to equalize emergency fire suppression costs across the various ODF protection districts when firefighting needs exceed a district’s budgetary capacity. The OFPLF is designed to operate as an insurance policy whereby all districts contribute into the fund so that money will be available to any individual district when needed.
The OFLPF and the General Fund each pay for half of the department’s firefighting costs, up to $20 million. After that, the General Fund covers costs up to the Lloyd’s of London policy’s deductible. Certain suppression costs, primarily those paid for or reimbursed by the federal government, would not count toward the deductible.
In addition to overseeing the OFLPF, the EFCC consults with the State Forester regarding renewal of the insurance policy. For 2023-2024, the deductible was raised to over $78.5 million, which is 57% higher than in 2021-2022 policy.
Oregon’s historic net fire seasons costs, even after factoring in inflation, would not meet this threshold, making it highly unlikely that this additional financial coverage would be needed in any given fire season. The premium was quoted at $4.1 million—nearly equal to both the 2021-22 and 2022-23 policies—for $25 million in coverage, which has not changed since the 2004-2005 policy.
After the special meeting, the EFCC, which contributes up to 50% of the policy premium, recommended that the State Forester not renew the policy.
After reviewing the recommendation, along with other supporting documents, Mukumoto agreed with the EFCC’s recommendation and chose to not renew the policy. One of the reasons cited by the EFCC for their recommendation was the decreasing balance of the OFLPF and the desire to preserve those funds for suppression costs and strategic investments rather than paying toward a policy that may not be the best fit for Oregon any longer.
“In many parts of the state, forest landowners large and small are already struggling under significant financial burdens to maintain healthy, sustainable working forestlands,” Brennan Garrelts, Chair of the EFCC, said. “In recognition of that, and the reality that ODF and the committee lack sufficient tools to influence funding and policy decisions, the committee must make prudent decisions where they can ensure solvency of Oregon’s primary firefighting fund.”
