The decision you're facing isn't whether wildfire risk is part of your organization's property portfolio. It's whether you'll discover your coverage structure during renewal season or during an evacuation order.
Nevada's Assembly Bill 376 created the first regulatory environment in the U.S. where insurers can exclude wildfire coverage from standard homeowners policies entirely, effective January 1, 2026. The Reno wildfire, which has burned roughly 15,000 acres and forced about 90,000 people under evacuation notices, is the first major test of that framework. For business continuity managers overseeing facilities in wildfire-exposed regions, this regulatory shift is a template other states may follow. Your coverage decisions today preview choices you'll face across your entire portfolio.
Key Factors Affecting Your Choice
Three variables determine which path fits your situation:
Regulatory Environment. Does your state allow wildfire carve-outs, maintain a FAIR Plan for last-resort coverage, or require insurers to offer replacement options? Nevada permits carve-outs without a FAIR Plan, creating a coverage vacuum. California permits carve-outs but maintains a FAIR Plan. Your state's structure dictates fallback options if your primary carrier excludes wildfire.
Property Location Relative to Wildland-Urban Interface. The Nevada Division of Insurance recorded 481 wildfire-related homeowner policy cancellations in 2023, an 82% increase over the prior year, concentrated in interface zones around Reno, Incline Village, and Lake Tahoe. If your facilities are in these zones, you're facing either standalone wildfire coverage requirements or outright exclusions regardless of your carrier relationship.
Carrier Appetite and Policy Language. Some insurers are carving wildfire out as a separate standalone product. Others are excluding it with no replacement offered. The difference matters: one path keeps you insured at higher cost, the other leaves you uninsured unless you source coverage elsewhere.
Path A: Accept the Carved-Out Standalone Wildfire Policy
Choose this path when:
- Your primary carrier offers a standalone wildfire policy as a companion to your standard property coverage.
- The standalone premium and deductible structure fit within your risk financing budget.
- Your facilities are in moderate-risk zones where standalone coverage remains available.
- You need continuous coverage without gaps during policy transitions.
What this path requires: You'll maintain two separate policies with potentially different coverage triggers, deductibles, and claims processes. Your standard property policy covers most perils, while your standalone wildfire policy covers fires originating from wildland sources.
The administrative burden increases. You're coordinating renewals across two policies, tracking two sets of requirements, and potentially managing claims through separate adjusters if a wildfire causes both direct fire damage and secondary perils like smoke or water damage from firefighting efforts.
When this path fails: If your carrier withdraws the standalone option mid-term or at renewal, you're back to sourcing coverage in a constrained market. The Nevada situation demonstrates this risk: carriers can offer standalone products one year and withdraw them the next as loss experience develops.
Path B: Source Coverage Through a State FAIR Plan or Surplus Lines Market
Choose this path when:
- Your primary carrier excludes wildfire coverage entirely with no standalone replacement.
- Your state maintains a FAIR Plan that covers wildfire as a peril.
- You're willing to accept higher premiums and more restrictive coverage terms in exchange for guaranteed availability.
What this path requires: FAIR Plans typically function as insurers of last resort with premiums 2-3 times higher than standard market rates and coverage limits that may not match your facility's replacement value. You'll need to demonstrate you've been declined by standard carriers, which means starting your coverage search well before renewal.
If your state lacks a FAIR Plan (like Nevada), you're sourcing coverage through surplus lines carriers who specialize in high-risk properties. This market operates without rate regulation, meaning premiums reflect pure actuarial risk plus a capacity scarcity premium.
When this path fails: FAIR Plans can suspend new policy issuance during catastrophic loss years when their capital reserves deplete. California's FAIR Plan faced this scenario after the 2018 Camp Fire. If you're counting on FAIR Plan availability as your fallback and that option closes, you're self-insuring by default.
Path C: Structure a Captive or Risk Retention Group for Wildfire Exposure
Choose this path when:
- You manage a portfolio of properties across multiple wildfire-exposed states.
- Your organization has sufficient capital reserves to fund a captive structure.
- You can demonstrate wildfire mitigation controls that justify better actuarial assumptions than the standard market applies.
- You need multi-year rate stability rather than annual market volatility.
What this path requires: You're establishing a formal insurance entity, either a single-parent captive or joining a risk retention group with other organizations facing similar exposures. This requires actuarial analysis to set appropriate reserves, regulatory filings in your captive's domicile jurisdiction, and ongoing capital contributions to maintain solvency ratios.
The advantage: you're pricing your specific risk profile rather than accepting pooled rates that reflect the worst-performing properties in your region. If you've invested in defensible space, fire-resistant materials, and early warning systems, your captive's rates can reflect that mitigation rather than subsidizing properties without those controls.
When this path fails: If your actuarial assumptions prove wrong and wildfire losses exceed your reserves, you're funding the shortfall from operating capital. Captives work when loss frequency stays predictable. Catastrophic events like the Reno wildfire can deplete captive reserves faster than you can replenish them.
Summary Matrix
| Decision Factor | Path A: Standalone Policy | Path B: FAIR Plan / Surplus Lines | Path C: Captive Structure |
|---|---|---|---|
| Regulatory requirement | State allows carve-outs; carrier offers standalone | State maintains FAIR Plan or surplus lines access | State permits captive formation |
| Property count | Single or small portfolio | Any size portfolio | Large multi-state portfolio |
| Capital requirement | Standard premium budget | 2-3x standard premium | Significant capital reserve |
| Administrative complexity | Moderate (dual policies) | Moderate (specialized carrier) | High (regulatory compliance) |
| Coverage stability | Depends on carrier appetite | Depends on FAIR Plan solvency | Depends on your reserves |
| Best for | Moderate-risk properties with willing carriers | High-risk properties in states with FAIR Plans | Sophisticated risk programs with mitigation controls |
The Nevada situation exposes what happens when Path A disappears and Path B doesn't exist. If you're managing facilities in states considering similar legislation, map your coverage path now rather than discovering your options during an evacuation order.
