By Anthony Cappelletti
https://www.soa.org/news-and-publications/newsletters/general-insurance/2019/june/gii-2019-iss-7/the-increasing-risk-of-wildfire-catastrophes/
There appears to be an increasing trend in the frequency and severity of large wildfires in both the U.S. and Canada.
In Canada, the Fort MacMurray wildfire of May 2016 in Northern Alberta resulted in $3.7 billion in insured losses. This accounted for nearly three-quarters of the $5 billion in total insured losses from catastrophes in Canada for the year. This event required the evacuation of over 85,000 people and destroyed more than 2,500 homes. Prior to 2016, the year with the greatest insured losses from catastrophes was 2013. The total insured losses from catastrophes in Canada for 2013 was $3.2 billion—most of this amount was from two separate floods. The second largest amount of total insured losses from a single catastrophic event in Canada was the 1998 ice storm in southern Quebec and eastern Ontario. The 1998 ice storm caused just over $2.2 billion in total insured losses (inflation adjusted to 2017 dollars). The 2016 Fort MacMurray wildfire was a record setting catastrophic event in Canada.
In the U.S., losses from wildfires in 2017 and 2018 were significant. Catastrophic losses in 2017 were dominated by three destructive Category 4 hurricanes (Harvey, Irma and Maria)— accounting for approximately $68 billion in total insured losses. However, 2017 also had unprecedented catastrophic losses from wildfires with over $13 billion in total insured losses. Of that amount, approximately $12 billion was from three major wildfires in California (Tubbs Fire, Atlas Fire and Thomas Fire) in a three-month period from October to December—over 15,000 homes were damaged or destroyed and over 100,000 people were evacuated. As a point of comparison, total insured losses from all wildfires for the ten-year period from 2007 to 2016 was $9 billion (inflation adjusted to 2017 dollars). 2017 was a record for total insured losses from wildfires. But that record didn’t last long. While not all of the statistics have been finalized for 2018, it is clear that insured losses from wildfires in 2018 will surpass that from 2017. A single wildfire in northern California (Camp Fire) will likely account for $12.5 billion in insured losses, the most ever for a wildfire. Total insured losses from wildfires in California for 2018 will likely be around $18 billion—most of this is from three wildfires: Camp Fire, Woolsey Fire and Carr Fire.
The amounts are significant and can’t be ignored. But what is driving the increase in losses from wildfires?
Wildfires need a cause of ignition and a supply of combustible material. Ignition may be caused by humans or nature. Common human causes of ignition include carelessness with campfires (or burning of debris), improperly discarded cigarettes, fireworks, arson and problems with power transmission (e.g., faulty or downed power lines). Natural causes of ignition include lightning strikes and lava. The U.S. Department of Interior estimates that most wildfires in the U.S. are started by human ignition. As for combustible material, wildlands are an abundant source. Given a cause of ignition and a supply of combustible material, a wildfire will spread quickly under certain weather conditions. Drought and strong winds provide optimal conditions for the spread of a wildfire. It would appear that these conditions are more prevalent now in the west and northwest of the U.S. and Canada. When examining statistics from the National Interagency Fire Center1 for the period from from 1960 to 2018, we note that the number of acres burned in the U.S. has an increasing trend of 1.2 percent annually using a simple exponential trend line. If we only use the period from 1990 to 2018, the annual trend is 4 percent.
There have always been wildfires. Most wildfires burn with little attention because the threat to property and human life is insignificant. There are more acres burned from wildfires now compared to levels over the past 50 years but that doesn’t fully explain the drastic increase in insured losses. In fact, annual acres burned from wildfires from the 1920s to the 1950s was much higher than the levels we have now. In those years, there was little effort expended to extinguish wildfires as most did not threaten lives or property. An interesting point of fact—while the acres burned has been increasing since the 1980s, the number of fires is actually showing a decreasing trend over this same time period.
The recent increase in destruction to property and insured losses from wildfires arises from the wildland-urban interface (WUI). The WUI is the area of home development adjacent to or in wildland areas. These areas are significantly exposed to the risk of wildfires. The WUI is growing. A recent article published in the Proceedings of the National Academy of Sciences of the U.S.A. noted that “the WUI in the United States grew rapidly from 1990 to 2010 in terms of both number of new houses (from 30.8 to 43.4 million; 41% growth) and land area (from 581,000 to 770,000 km; 33% growth), making it the fastest-growing land use type in the conterminous United States.”2 New home development now tends to focus on the WUI.
In addition to the growth of the WUI, little attention has been paid to mitigating the risk of wildfires to properties in the WUI. Homes were being built in the WUI with combustible roof and siding materials. Vents in homes were not fitted with screens that could block burning embers from entering homes. Homes were built relatively close to each other in the WUI with combustible landscaping (i.e., trees planted adjacent to the homes). Fences and decks in the WUI tended to be built from wood instead of non-combustible materials.
Content retrieved from: https://www.soa.org/news-and-publications/newsletters/general-insurance/2019/june/gii-2019-iss-7/the-increasing-risk-of-wildfire-catastrophes/.
