Tag Archives: California wildfire

The Sum of Its Parts: Wildfire in Multi-Peril Catastrophe Bonds

Water, wind, and wildfire. It’s been a devastating three months for the U.S.

Total insured losses from Hurricanes Florence and Michael, and the Camp and Woolsey wildfires are estimated by RMS in the range US$18.6 billion to US$28 billion (see table below):

September 1 Hurricane Florence $2.8 – $5.0 billion
October 8 Hurricane Michael $6.8 – $10.0 billion
November 8 Camp Wildfire $7.5 – $10.0 billion
November 8 Woolsey Wildfire $1.5 – $3.0 billion
TOTAL INSURED LOSSES   $18.6 – $28 billion

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.

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Camp and Woolsey Fires: A Historical and Numerical Perspective

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.

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Fires in Paradise: Exposure Growth and Catastrophe Risk in the Wildland-Urban Interface

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.

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Impact of the California Wildfires: Chris Folkman from RMS on CNN’s Quest Means Business

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.

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The New Reality of North America Wildfire

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.

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California Wildfire: Another Record-Breaking Year?

Memories of last year’s Wine Country fires in Northern California and the Thomas Fire in Southern California are top of mind as we look at the unfolding wildfire events across the state, especially the notable Carr Fire to the northwest of the city of Redding in Shasta County, with a population of around 92,000.

Initial observations show similarities to the Wine Country fires in terms of its speed and ferocity, as the Carr Fire spread rapidly overnight on Saturday, July 28, nearly doubling in size. As of 02:00 UTC on Thursday, August 2, the fire is reported to have burned about 121,000 acres (~49,000 hectares) — see figure one below, destroying 1,546 structures, damaging an additional 255 structures, and forcing the evacuation of 38,000 people, according to CAL FIRE and local officials.

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Southern California: Thomas Fire Loss Estimate and Mudslide Commentary

Thomas Fire Loss Estimate

RMS has produced estimates for the insured loss arising from the Thomas Fire that affected the Southern California counties of Ventura and Santa Barbara in December 2017. The estimate will fall between US$1 billion and US$2.5 billion, and includes loss caused by burn or smoke damage to personal, commercial, and industrial lines of business, along with insured loss from business interruption and additional living expenses. It excludes loss to automobile and agriculture lines of business and all damage related to the recent mudslides that impacted the same area. This estimate was calculated using RMS high-resolution exposure data and comparisons against historical fire damage, loss, and claim data.

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California Wildfires: Special Climate Conditions Drive Enhanced Risk

Satellite image taken on December 5, based on observations of visible, shortwave infrared, and near infrared light. Image Credit: NASA

Wildfires are once again raging across California, this time focused in the southern part of the state. Prior to the ignitions, weather forecasts called for a significant Santa Ana wind event from Monday (December 4) through Thursday evening (December 7), driven by a high-pressure system across the western United States. The NOAA Storm Prediction Center noted in their Day 1 Fire Weather Outlook valid for Monday, December 4, that, “A very strong surface pressure gradient… coupled with strong low-level northeasterly flow will easily support sustained offshore winds of 30-40 miles per hour (48-64 kilometers per hour) across parts of Ventura into Los Angeles counties beginning later this evening and continuing through early Tuesday morning. Wind gusts of 60-80 mph (96-128 km/h) will be possible across the mountains/foothills of these counties where channeling and terrain effects can locally enhance the already strong flow, with gusts of 45-60 mph (72-96 km/h) likely at lower elevations.”

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Wine Country Wildfires: Reconnaissance and Loss Estimate Update

Kevin Van Leer, senior product manager – Model Product Management, RMS

19:00 UTC Friday, October 27

Figure 1: A door frame of a destroyed home overlooks another neighborhood affected by the Wine Country wildfires (Image credit: RMS)

Accompanied by a CAL FIRE escort, on Monday, October 23, RMS reconnaissance experts visited areas affected by the Wine Country wildfires, with a focus primarily on the Tubbs Fire which caused destruction across the Northern California counties of Napa, Sonoma, and Lake. Based on this reconnaissance, RMS has now updated its loss estimate, benefiting from an additional review of the available damage information, plus a review of historical fire damage data.

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California Wildfires: Latest Loss Estimates

Kevin Van Leer, senior product manager – Model Product Management, RMS

20:00 UTC Tuesday, October 17

Nearly ten days have passed since the first four wildfires spread rapidly in Northern California. As of Monday, October 16, over 10,000 firefighters battled 14 fires, principally in the wine-growing valleys north of San Francisco. Fires in Napa, Solano, Sonoma, Mendocino, Lake, Yuba, Butte, Fresno, Calveras, Orange and Nevada counties have burned about 213,000 acres (86,000 hectares), destroying about 5,700 structures and forcing the evacuation of over 100,000 people, according to CAL FIRE and local officials. Aerial photographs show whole neighborhoods in northern Santa Rosa destroyed, and a neighborhood of about 70 houses has been destroyed in east Santa Rosa. Reports on Monday, October 16 state that there are 41 recorded fatalities, and hundreds of people are missing.

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