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Wildfires push Californians to high-risk insurance market

LOS ANGELES, Sept 21 (Reuters) - There are lots of reasons people live in California's Modjeska Canyon.

Nestled against the mountains and abutting the Cleveland National Forest, the area has abundant wildlife and access to nature, yet is just a 20 minute drive from larger Orange County communities.

But the things that make Modjeska appealing have also made homes there and in other wildfire-prone parts of California increasingly difficult to insure.

In the last decade, major wildfires in California - and losses in the billions of dollars - have led some big insurance companies to stop writing homeowners policies for many of the nearly 2 million households that are considered at high risk of fire. Allstate Corp, for instance, in 2007 stopped writing new homeowners policies in the Golden State altogether. Others, like Farmers Insurance and State Farm, have become more discriminating about the areas they will insure homes.

Californians who can't find insurance in the traditional market can purchase limited fire coverage from a state-established consortium of insurance companies.

Yet data shows that many homeowners who have been denied coverage by standard insurers are not flocking to the state plan, which is both more costly and far less comprehensive than traditional homeowners' policies. Rather, they are increasingly signing up for specialty policies provided by companies best known for insuring unusual risks such as major construction projects, kidnapping or rare art collections. Such policies are still expensive, but offer more coverage than the state plan.

Bonnie Smith, a landscape designer who has lived in Modjeska Canyon since 1981, said the availability of traditional homeowners insurance plans tightened after a...