A proposed bill in Arizona is sparking controversy in the insurance industry, as lawmakers consider legislation that would protect utilities from lawsuits related to wildfires started by their equipment. The bill, if passed, would make it harder to prove utility liability and limit damages, potentially shifting the burden of wildfire claims from utilities to homeowners and their insurers.

The bill would require utilities to file plans every two years detailing their efforts to mitigate wildfire risks, but critics argue that it doesn't hold utilities accountable for following these plans or maintaining their equipment properly. This lack of accountability has raised concerns that the bill could have unintended consequences, such as increasing insurance premiums for homeowners or leading to higher utility costs.

The insurance industry is already reeling from the impact of wildfires, with startups like Hippo and Lemonade reporting significant losses due to recent wildfires in California. Hippo reported $42 million in losses, while Lemonade is expecting to lose $45 million. These losses have led to increased premiums and dropped coverage for some homeowners in Arizona, with some rates tripling this year.

However, the growing risk of wildfires has also created opportunities for other startups, such as Kettle, which offers reinsurance and models wildfire outcomes to help companies manage their risk. Despite this, the overall trend has been towards higher costs for homeowners, who are already struggling to afford insurance coverage.

The Arizona bill is part of a larger trend, as states across the Western United States grapple with the threat of wildfires exacerbated by climate change and over a century of fire suppression. For decades, fires were quickly stamped out, but this approach has led to a buildup of fuels in forests, creating conditions ripe for catastrophic wildfires. Climate change has further compounded the risk, with rising temperatures and changing precipitation patterns leading to drier conditions and more frequent high-intensity fires.

Wildfire experts point to the role of "ladder fuels" in spreading fires from the forest floor to the canopy, where they can become catastrophic. The accumulation of leaf litter and brush over the years, combined with the effects of climate change, has created a perfect storm of wildfire risk. As the West continues to grapple with the fallout of wildfires, the Arizona bill serves as a lightning rod for the larger debate around liability, risk, and the role of utilities in preventing these devastating events.

As the bill moves forward, it remains to be seen how it will impact the insurance industry and homeowners in Arizona. One thing is clear, however: the growing risk of wildfires demands a comprehensive approach that addresses the root causes of these disasters, rather than simply shifting the burden of liability. As Marcus Osborn, an insurance company lobbyist, noted, "There's no free lunch in this. You're either going to pay in higher insurance premiums or you're going to pay in higher utility costs."