How big is your exposure to wildfire?...Many insurers are working hard to answer this question. Wildfire activity has expanded, in size, location and dollar losses, and reached record levels in 2017 and 2018. Given California Department of Insurance reports of a nearly 10% insurer nonrenewal rate in wildfire-prone areas, some carriers are clearly concerned about their risk concentrations.

Several factors appear to be sustaining the upward loss trend. One major factor is the rapid increase in structures built in the WUI - Wildland Urban Interface. Another is climate change, which may be exacerbating the normal fluctuations of weather conditions. Also, the persistent infestation of bark beetles is killing trees that provide more fuel for wildfires. More recently attention has focused on utility operations and related infrastructure maintenance practices - the human element.

With the recent wildfire losses, California has drawn much of the industry’s concern - and rightfully so given the high number of high-risk households (15% of total households) in that state. However, there are other Western states with a much higher percentage (28% for Montana and 26% for Idaho, for example) of households exposed to wildfire at a high or extreme risk level.

Mapping Your Hazards

While insurers and vendors are moving more resources to improve wildfire maps, the risk evaluation and aggregation tools are still relatively unsophisticated compared to those for hurricane and earthquake.

One current limitation in existing tools is the incomplete historical record of physical wildfires, acres burned, wildfire-related structural losses and human loss of life. Another weakness is the use of traditional geopolitical map aggregation zones (county, town, ZIP code) for exposure management, as compared to wildfire peril behavior, which doesn’t follow traditional map boundaries.

Recognizing these and other inherent weaknesses, at Gen Re we have focused considerable effort on finding other available data sources to evaluate and identify wildfire hazard. Building on additional data sources and a licensed Cat model, we integrate our client companies’ risk location data with a spatial mapping tool to help evaluate individual risk as well as accumulations across client portfolios.

Here are some examples of the risk factors successfully employed with our spatial mapping tool:

• Company’s location data on a map with high-quality geocoding
• Detailed topographical maps, including slope zones and vegetation types
• Maps depicting WUI areas and changes over time
• Drought area maps
• Utility service area/high voltage power line maps
• Bark beetle and other destructive insect damage - actual and expected

Our more extensive list is provided in the full Gen Re article.

The wildfire peril presents challenges to the insurance industry for individual risk analysis and portfolio management. One challenge is to think outside the box and piece together many varied sources to overlay on traditional hazard maps to make more informed underwriting and accumulation decisions. We have worked with clients using spatial mapping and other tools to help analyze portfolios and to identify areas of peak exposure. If you are interested and want to explore that further, please contact your local Gen Re representative today.