The BulleTin • Sunday, april 18, 2021 A7
Lloyd’s
Continued from A1
The worst wildfires in the
state’s history swept down out
of the west Cascades slopes
into the Willamette Valley over
the 2020 Labor Day weekend.
The 16 major fires burned 1
million acres, destroyed more
than 4,000 homes and other
structures, caused 40,000 peo-
ple to be evacuated, and killed
11 people.
By the third week of Septem-
ber, the Northwest Interagency
Coordination Center, a logisti-
cal center for regional wildfire
response, estimated Oregon’s
fires would cost $53 million,
which put the state and Lloyd’s
on alert that a claim might be
filed.
The final cost of the Oregon
wildfires to the Oregon De-
partment of Forestry was about
$130 million. The bill was off-
set by more than $70 million
in federal disaster aid, along
with fees the state earned for
fighting fires on land it did not
control and reimbursement for
other aid.
“The cost for suppressing
the 2020 wildfires is estimated
at just under $50 million,
which is why it did not trigger
the policy,” Gersbach said.
The current policy runs
through April 15, 2022. Lloyd’s
of London accounts for 90% of
the policy cost, while Nashville,
Tennessee-based Acceptance
Insurance carried 10%.
The Legislature will vote
on a portion of the premium
in the Oregon Department of
Forestry budget, which is now
before the Joint Ways & Means
Committee.
When Lloyd’s of London
and the state negotiated a re-
newal of the policy, it included
a relatively modest 3% pre-
mium increase to $4,131,871
per year. The cost is split be-
tween the state and private
John Locher/AP file
Firefighters with the Monitor Fire Department wait in an area destroyed by a wildfire near Mill City on the North Santiam River in 2020.
timberland owners. Landown-
ers pay their share through a
property tax formula.
The Oregon Department of
Forestry, which holds the in-
surance contract for the state,
says the policy has saved the
state millions over the years.
The agency is responsible for
about 16 million acres of for-
ested land — about half the to-
tal in the state.
ODF is also the key firefight-
ing agency on 2.3 million acres
controlled by the U.S. Bureau
of Land Management.
“This helps the agency keep
fires from spreading to other
ODF-protected lands, mini-
mizing overall cost and poten-
tial loss,” Gersbach said. “If a
fire on BLM land escapes ini-
tial attack, BLM is no longer
eligible to receive large fire cost
reimbursement.
In those cases, BLM must
reimburse the state for ODF’s
firefighting costs. Reimburse-
ments for the 2020 fires are one
of the reasons the overall costs
to ODF fell below the mini-
mum level for the Lloyd’s pol-
icy to be activated.
Gersbach said during the 48-
year relationship with Lloyd’s,
the state has received $99 mil-
lion in claims payments against
$75 million in premiums it
paid. The most recent claims
ODF made were for $25 mil-
lion in 2013 and $23.2 million
in 2014.
The consecutive years of
claims led Lloyd’s to nearly
double the premium from
$2 million to $3.75 million.
The deductible rose from $20
million to $50 million, while
Lloyd’s maintained a cap on its
payout to $25 million.
Some state lawmakers
balked at the increase, suggest-
ing the state instead create a
$60 million firefighting trust
fund that the state would fi-
nance directly. But there were
concerns that in tight budget
years, future legislatures or
governors might be tempted
to “sweep” the fund to use to
finance unrelated programs or
projects.
There had been concern that
a 2020 claim could drive up
the premium price as Lloyd’s
faced a historic year of payouts
driven by the COVID-19 pan-
demic.
Lloyd’s has thrived since
its beginnings in 1686, sell-
ing shipping insurance out of
a coffeehouse near the Tower
of London, by balancing risk
so that premiums more than
cover claims.
COVID-19 crisis
Lloyd’s was hit with over
$8.5 billion in claims filed in
2020 directly related to the
COVID-19 pandemic — the
most from any single event in
its three centuries in the insur-
ance business.
“A crisis of a scale never seen
before,” said Lloyd’s chairman
John Neal during a March 31
press conference.
In recent decades, Lloyd’s
has upgraded its computer
modeling to take into account
the extremes of natural disas-
Veteran, Locally Owned & Operated
ters in a given year. The wild-
fires were historic for Oregon,
but within the parameters of
possible worldwide calamities
that occur every year which
Lloyd factors into its premi-
ums. The Brexit fallout had
been factored in beginning
with the 2016 vote to leave the
European Union.
Lloyd’s posted a $3.45 billion
profit in 2019. With Brexit, it
knew 2020 would be a tighter
year financially, but premium
adjustments would have ended
the year with a $1 billion profit.
But the COVID-19 was a
“black swan” — the term for
a rare, unseen disaster of epic
magnitude.
The pandemic blew out
those forecasts, leading to a
$1.24 billion loss in 2020.
Neal said COVID-19 was
now factored into its fore-
cast for coming years. A rise
in premiums spread out over
time was as a way to recoup
some of the losses. Lloyd’s said
it hoped that 2021 would see
fewer claims as the pandemic
possibly ebbs and ends across
the world in the next two years.
But the appearance of new vi-
rus variants has clouded the re-
bound scenario.
With its relationship with
Oregon nearing a half-century,
Lloyd’s is more likely to con-
tinue to sell the policy to Ore-
gon even as drought and rising
temperatures make a devastat-
ing fire season more likely with
each year.
The Oregon Department
of Forestry hopes to continue
the relationship with Lloyd’s
as long as possible. The next
renewal is in the department’s
budget, which is currently
awaiting action in the Joint
Ways & Means Subcommittee
on Natural Resources.
“We believe it continues
to be a prudent investment,”
Gersbach said
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