As wildfire risks intensify, coverage gaps in standard policies are leaving lenders and servicers increasingly exposed. Wildfire Exclusions in As wildfire seasons grow longer and more intense across the U.S., the financial implications for lenders and servicers are increasing. While most standard homeowners’ insurance policies technically cover fire-related damage, there’s a troubling trend emerging in wildfire-prone regions: exclusions or limitations on wildfire coverage. This shift could leave critical gaps in protection, directly impacting your institution’s exposure. The Coverage Gaps: Wildfire Exclusions Standard property insurance often includes fire as a covered peril. However, in high-risk wildfire zones, insurers are increasingly: • Raising wildfire-specific deductibles; • Imposing coverage caps; or • Excluding wildfire damage altogether. This means your borrowers could be underinsured without even realizing it or might need to purchase additional wildfire-specific coverage. For banks, credit unions and mortgage servicers, this creates an elevated risk in portfolios tied to wildfire-prone geographies. Your Bank’s Portfolio ARE YOUR HIGH-RISK ASSETS PROTECTED? By MeKelee LaFoy, CP Insurance Associates Colorado Banker 18
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