On January 30, Judge William Alsup, district judge for the Northern District of California presided over a hearing to discuss the inclusion of wildfire prevention in a 2016 Probation Order mandated to Pacific Gas and Electric (PG&E) in the aftermath of the 2010 San Bruno gas explosion that left eight dead.
An order to add conditions to their existing probation, filed on January 9, aimed to “…protect the public from further wrongs by the offender, to deter similar wrongs by other utilities, and to promote the rehabilitation of the offender…” The order included the determination from CAL FIRE that PG&E caused 18 wildfires in 2017, with CAL FIRE continuing its investigations into the causes of the more recent Camp Fire last year.
From major wildfires just over four months ago, and now major flooding, Northern California seems to leap from one perilous state to another. This time, rainfall from a “potent atmospheric river”, as described by the National Weather Service, caused flooding to over 3,000 properties in Sonoma County. This atmospheric river – a flowing column of condensed water vapor pumped up from the Tropics which can be up to 375 miles (603 kilometers) wide – started delivering rain and snow into the region late on Sunday, February 24.
The small town of Guerneville (pop. ~4,500) fared worst, reporting nearly 21 inches (529 millimeters) of rainfall in just 72 hours by 5 p.m. local time on Wednesday, February 27. The source of the town’s flooding was the Russian River, which flows from Mendocino County through to Sonoma County, reaching a maximum level of 45.5 feet (13.9 meters) at Johnson’s Beach, near Guerneville. This exceeded the defined 40 feet (12.1 meters) threshold for a major flood at this point, with local media reports stating that this is the worst flooding since New Year’s Day in 1997, when the river rose to 45 feet (13.7 meters). The nearby Napa River also crested at 26 feet (7.92 meters), one foot above the flood stage.
The town of Guerneville, which was originally built on a meander in the river, on February 27 was declared by the Sonoma County Sheriff’s Office “… [as] officially an island …” as all roads in an out of the town were flooded. 4,000 residents in both Guerneville and Monte Rio (pop. ~1,200) were under evacuation orders until Friday, March 1.
What will the 2019 wildfire season bring across the United States?
Across the United States, around eight and a half million acres burned in 2018, nearly three times the annual average during the 1980s and 1990s. That is the equivalent of the entire state of Maryland burning in one year. Last year’s Camp and Woolsey fires in California burned a total of 245,000 acres – these two fires alone burnt a combined area around three times the size of Detroit, destroyed more than 12,000 structures and killed 80 people.
It is getting hard to argue that the size and ferocity of the most recent wildfires across the U.S. are just anomalies, the evidence just does not support these events as being exceptional anymore.
As California’s then Governor Jerry Brown stated at a press conference as the Camp and Woolsey fires raged, these wildfire events are “… the new abnormal …” and that events may worsen over the next few decades. He added that “… the best science is telling us that dryness, warmth, drought, all those things, they’re going to intensify.”
While California wildfires may seem far removed from Atlantic storms, for capital markets investors the fires may make the difference to how 2018 is remembered. Insurance Linked Securities (ILS) eyes are now trained on multi-peril aggregate catastrophe bonds.
When I was a kid, my favorite breakfast cereal was Kellogg’s Sugar Frosted Flakes. As a teenager in the 1980s, I recall that the name changed to Frosted Flakes. In 1983, to appeal to a more health-conscious consumer, Kellogg simply dropped “sugar” from the name. And around the same time, Kellogg’s Sugar Smacks became Honey Smacks. There didn’t seem to be a dramatic reduction in sugar. Even today, sugar makes up over 55 percent of the total content of Honey Smacks and is the lead ingredient. Honey trails at fourth. The idea was … if the consumer didn’t see the word sugar, they wouldn’t necessarily jump to the conclusion that it was loaded with sugar. One could argue that this was just a marketing ploy – yet most would agree it secured marketing appeal by removing a potential distraction from its name.
At the time of writing, the recent Camp and Woolsey Fires in California have burned a combined total of 245,000 acres (93,000 hectares) — an area about the size of Dallas. These fires have destroyed more than 12,000 homes and businesses, and killed 80 civilians. Ordinarily these would be called extreme events. But these are not ordinary times. After back-to-back record breaking wildfire seasons, including the Wine Country fires (US$11 billion) and Southern California Fires (US$2.3 billion) in 2017, and the Carr Fire (~US$1.2 billion) and Mendocino Complex fires (~US$200 million) this year in July, California Governor Jerry Brown perfectly summed up the current situation in his state: “This is the new abnormal.”
As firefighters make continuing progress on containment of both fires, the California Department of Forestry and Fire Protection (CAL FIRE) is quickly assembling an inventory of each burned structure, to detail the extent of the damage. Based on this data, plus a simulated reconstruction of the event’s wind, moisture, fuel, and fire spread parameters, RMS estimates the insured damage at between US$7.5 billion and US$10 billion for the Camp Fire, and US$1.5 billion and US$3 billion for the Woolsey Fire. This estimate accounts for burn and smoke damage; structure, contents, business interruption (BI), and additional living expenses (ALE) payouts; damage to autos; and modest post loss amplification (PLA) that may result from surges in labor costs, ordinance and law endorsements, and related coverage extensions.
Like many communities in California with a mild climate, affordable housing, and scenic wilderness, Butte County (pop. ~230,000) has grown significantly over the past four decades. Broadly, this growth is happening all around the county — both in cities (e.g. Chico, the county seat and largest city, pop. ~94,000) as well as in more rural areas. Looking more closely, however, the specific spatial patterns of Butte’s development reveal conditions that set the stage for the ongoing Camp Fire to become one of the deadliest and most destructive fires in California history.
Chris Folkman, senior director of product management at RMS, was interviewed by Paula Newton on CNN’s Quest Means Business program on Monday, November 12, about the impact of the California wildfires.
Paula asked Chris about the range of factors that have made these wildfires so intense, and also about the potential causes of the fires. Chris explained how the fires could have started and how the almost perfect conditions for the fire produced such a rapid spread. For the Camp Fire in Northern California, deaths were caused by the fire’s sheer speed that had overwhelmed residents as they tried to escape from the path of the flames.
Describing the scale and savagery of the wildfires currently burning in California is difficult to do, but a simple recounting of the statistics is a good starting point. They are thus:
At the time of writing, fifteen wildfires are now burning more than 280,000 acres (~113,000 hectares) in California. Collectively, they have laid waste to almost 7,000 homes and businesses. 31 people have died in the fires. 300,000 more were evacuated. 12,000 firefighters are working the front lines, making admirable progress at containment.
The biggest of these events, the Camp Fire (named for the road of its point of origin) is the most destructive wildfire in history, with 6,700 structures burned. During a period of particularly intense wind, it spread at a rate of more than one football field per second. Entire towns in its path are effectively destroyed.
Catastrophe modeling remains work in progress. With each upgrade we aim to build a better model, employing expanded data sets for hazard calibration, longer simulation runs, more detailed exposure data, and higher resolution digital terrain models (DTMs).
Yet the principal way that the catastrophe model “learns” still comes from the experience of actual disasters. What elements, or impacts, were previously not fully appreciated? What loss pattern is new? How do actual claims relate to the severity of the hazard, or change with time through shifts in the claiming process?
After a particularly catastrophic season we give presentations around ”the lessons from last year’s catastrophes.” We should make it a practice, a few years later, to recount how those lessons became implemented in the models.