Lockton: The burning cost of wildfire risk


Wildfires have dramatically increased in both frequency and severity. This is no longer an issue affecting a small number of geographies, but now a global challenge with catastrophic consequences to both life and property.

Some sectors of the economy are particularly affected by expanding liability risks and an action plan is needed to prevent insurance costs from spiralling out of control.

Experts attribute the shift in the wildfire risk to two interacting factors: Climate change and a shift in land use. When combined, these factors can create ideal conditions for rapidly spreading and intense fires that are difficult to extinguish.

Such wildfires have become increasingly common in some parts of the world (opens a new window) such as California (2017, 2018), Canada (2014, 2017, 2018), the Mediterranean (2017, 2018), Siberia (2003, 2012, 2019) and Australia (2009, 2013, 2019).

The fact that these large wildfires develop in populous regions makes them particularly dangerous. They do not only impact people’s health but also ecosystems and local economies.

Australia has a long history of bushfire losses but costs have been rising in the past decades. Electricity infrastructure assets, government bodies and vegetation management operations are particularly affected and are driving claims frequency activity.

Among the most notable and costly events is the 2019 Cudlee Creek class action that some believe to exceed AUS$200m in potential liabilities.

Chart with Australian Bushfires above AUS 500M.

North America is also experiencing a similar increase in losses. The 20-year snapshot on excess liability loss trends below excludes the four largest wildfire claims in California and incurred but not reported losses, but still shows a gradual increase over the past decades.


Source: Aegis 2022


Bushfires are not confined to the global hotspots but are becoming a worldwide issue as the following table illustrates:

Content retrieved from: https://global.lockton.com/gb/en/news-insights/the-burning-cost-of-wildfire-risk.


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