As Wildfires Get Costlier and Deadlier, Insurers and Utilities Pay the Price


By Rob Bailey Director of Climate Resilience at Marsh McLennan Advantage

This summer, we have seen devastating climate-related disasters occurring across the world. Record-breaking wildfires are lasting longer and burning more land due to historic heatwaves and drier conditions.

Many believe that we have entered a fiery new normal. But the “new normal” framing — the idea that we have reached a new equilibrium — is misleading. Climate change and growing numbers of people and assets in fire-prone areas mean there is little chance that wildfire risk will stabilize in the foreseeable future, regardless of whether the last two years were outliers or the start of something more alarming.

Climate change is estimated to have lengthened fire seasons across a quarter of the world’s vegetated land surface. In the Western U.S., large fires are now almost seven times more likely to occur than three decades ago, and climate change is estimated to have almost doubled the forest area burned since 1984. In Canada, large fires are getting bigger and more frequent. Across large parts of Australia, extreme fire weather — hot, dry and windy days when the risk of bushfires peaks — is becoming more common

At the heart of the problem is the fact that higher temperatures and droughts are contributing to drier forests and shrublands that catch fire and burn more easily. As climate change continues, these trends are likely to become more pronounced. Southern Europe could see the area burned by wildfire double by the end of the century. For parts of the Western U.S., a doubling of burned area or more could occur by mid-century. Similarly alarming forecasts have been made for Canada and Australia.

Climate change is only part of increasing wildfire risk. As urban developments around the world creep further into wildlands, the number of people and value of assets exposed to fire-prone areas is increasing. The U.S. has given a name to the frontier of urban sprawl — the wildland-urban interface — and between 1990 and 2010, the wildland-urban interface’s area in the U.S. expanded by a third, and its housing stock grew by over 40%.

Some of the most rapid growth has been in the most fire-prone areas. In California — the epicenter of wildfire activity — the so-called wildland-urban interface has expanded by 60% since 1970 and now contains 4.5 million homes. Though less well-documented, similar patterns are discernible in other high-risk areas, such as Southern Europe and Australia.

On a global scale, urban land area is expected to triple between 2000 and 2030. Much of this expansion will happen in Africa and Asia. Many African and Asian countries already experience significant wildfire activity, but this has been declining due to the adoption of modern agricultural practices and the emergence of large-scale fields and pastures that create breaks in fuel sources such as forests and shrublands. In such places, future wildfire risks are hard to anticipate — they will be shaped by patterns of climate change, urban development and agricultural development. But the rates of population growth and economic growth mean the stakes are high. In the future, wildfire may no longer be something that happens only in remote areas far away from population centers.

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