Wildfire: Managing a Peak Peril

A new wildfire season looms on the horizon across the United States, and as the last two years of huge wildfire insured losses and extensive devastation to lives and property clearly illustrates, wildfire is no longer an easily manageable loss for the (re)insurance industry – but a new peak peril.

So, what could be in store for the 2019 season? The industry is reeling from back-to-back seasons with losses over US$10 billion. This is unprecedented even during a period when average losses between 2011-2018 were at US$3.7 billion. And looking back, this is up 40x compared to 1964-1990, where losses were below US$100 million in today’s prices. What is changing with this peril, what are the risk drivers that we need to look out for?

It is becoming clear that wildfire risk must be managed much more actively by the (re)insurance industry, with more advanced modeling, analytics and research. I was honored to be invited to present a webinar together with Daniel Gorham, research engineer from the Insurance Institute for Building and Home Safety (IBHS) entitled “Navigating Wildfire Risk Catastrophe Analytics for a New Peak Peril”. This webinar is available on-demand for you to view, see the video below.

In this webinar, I examine each of three growing drivers of wildfire risk: exposure growth changes in the fuel landscape, and climate change. What is also apparent when examining these drivers is the need for more granular, robust modeling to capture the complexity of wildfire hazard. The factors that need to be considered when assessing the hazard must of course look at the type of fuel, the basis for many conventional wildfire models.

But it needs to go way beyond that, to look at the terrain – how it slopes, the rate of fire spread, the intensity, plus critical factors such as the concentration of smoke, and ember accumulation and travel – pivotal to recent urban conflagrations such as the one in the Coffey Park Neighborhood of the 2017 Tubbs Fire.

And for the vulnerability side of wildfire modeling, the webinar examines the crucial work of the IBHS and its research around building ignition mechanisms – from direct flame contact, radiative heat transfer and embers. Some studies suggest that up to 90 percent of buildings that are destroyed by wildfires were ignited by embers, and these can be embers that land directly on a building or “indirect” on flammable material just outside a building.

Many building characteristics can help resist ignition, such as roofing, siding, eaves, vents and decks. In the webinar, Daniel takes viewers through the impact of each and discusses the importance of defensible space around a structure. Working together with the IBHS, RMS created an industry-leading vulnerability module that accommodates these important mitigation features.

The sheer volume and range of questions we received during the webinar indicates the industry’s interest in managing this pervasive peril much more effectively. If you would like to find out more about the RMS® U.S. Wildfire High-Definition (HD) Model, part of the RMS North America Wildifre HD Models suite, please click here to explore our dedicated microsite, and click here for more on wildfire research by the IBHS.

Chris Folkman is a senior director of product management at RMS, where he is responsible for specialty lines including terrorism, casualty, wildfire, marine cargo, industrial facilities, and builders' risk. He has extensive experience on both the broker and carrier sides of insurance, where he has led many aspects of property and casualty operations including underwriting, pricing, predictive analytics, regulatory affairs, and third-party commercial coverage and claims.

Prior to RMS, he was a managing director at CompWest Insurance Company, a workers’ compensation start-up that was acquired by Blue Cross Blue Shield of Michigan. Chris holds a bachelor's degree from Stanford University. He is a licensed insurance broker and a Chartered Property and Casualty Underwriter (CPCU).

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