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Climate-Related Risks: Rise in Wildfire-Prone States Panel Recap from the Joint Industry Forum

Insurance
Author: ServiceMaster Restore

On December 5th, 2022, ServiceMaster Restore Chief Development Officer Jim Boccher took part in a Climate-Related Risks panel titled Climate-Related Risks: Rise in Wildfire-Prone States at Triple-I’s annual Joint Industry Forum in New York City.

Panel Introduction by Jim Boccher

Jim Boccher, Chief Development Officer at ServiceMaster Restore, kicks off the panel by stating, “The coverage of wildfire tends to look very uniform year after year, even in years when it may not be the case. The story seems to be that fires are just getting bigger, burning longer, and becoming harder to put out. Thus, creating more costly damage – and there's not anything anybody seems to be able to do about it.”

What we know:

  • Insured wildfire losses are on the rise, as are losses from other natural catastrophes.
  • More people are moving and living in harm's way, areas that are prone to more natural catastrophes. For wildfires, this means more people are moving into the wildland-urban interface.
  • We’re seeing increased fire exposure in these areas that are already prone to natural catastrophes. This means more homes, more vehicles, more infrastructure – moving into harm’s way, and this contributes to higher insured losses.
  • Furthermore, wildfires are no longer isolated in the states you’d think (California, Washington, Oregon, or Colorado.) More and more wildfires are popping up in Minnesota, Georgia, North Carolina, Texas, and even Florida.

Fueling the Fire

Triple-I non-resident scholar Craig Clements, Ph.D., Professor of Meteorology and Climate Science at San Jose State University, assesses the current state of wildfire risk. “Fire Danger is a combination of fuels, topography, and weather” states Clements.

According to the US Department of the Interior, anything that can burn is fuel for a wildfire, and as these materials build up over time, the chances of a catastrophic fire do too. All kinds of plants and plant material can contribute as fuel:

  • Grasses
  • Shrubs
  • Trees
  • Dead leaves
  • Fallen pine needles and more

“Think about the Marshall fire last year in Boulder – that caught many people by surprise,” adds Clements. From a scientific standpoint, the reason the fire was surprising is because it was a grass fire, which are fast-moving but don’t normally spread the way the Marshall fire did. The Marshall fire was the costliest wildfire in Colorado’s history, and one of the top 15 most destructive wildfire in the U.S. — only two of which were grassland fires. Climate change has impacted fires through amplified drought intensity. The drier the fuel – in this case the grass, the easier and more quickly it will ignite, which leads to further catastrophic wildfires.

Natural wildfires are almost always caused by lightning. When lightning strikes, it produces enough heat to easily ignite fuels like leaves, trees, or other organic material, especially in dry conditions.

burning building

The National Fire Protection Agency (NFPA) says wildfires are becoming a bigger risk because more people are living in areas that are susceptible to wildfires. In 2017 alone, over 56,000 wildfires burned over 9 million acres. In 2020, more than 58,000 wildfires burned a record-setting 10+ million acres – nearly 40% of these acres in California.

Clements believes that especially since the pandemic, more and more people have migrated to the mountains and other rural areas, throwing a “people problem” into the mix.

But it’s not just flames that destroy homes, it’s ember and firebrand transport as well. Firebrands are pieces of burning debris such as twigs, branches, logs, or pinecones that can contribute to a fire’s spread by rolling downwards or being carried within the fire convection column, according to weather.gov. Because of this, the scientific community is putting their future focus into firebrand research as current risk models do not take them into account.

Clements also mentioned the role embers play in wildfire destruction. When you see large plumes above the fire, those consist of embers, ash, and debris. Even those that do not live near the forest should stay alert as embers can travel great distances. While one ember landing atop a structure may not ignite it, if they accumulate, issues will arise. Today, scientists are attempting to model this kind of ember transport through structural burn prediction.

Climate Risk and the impact of other natural disasters

Ultimately, many of the large fire losses we see correlate to climate demographics, because climate change is affectively altering those fuels.

Although fire danger across the broader United States is low, due to the effects of climate change, that may not always be the case. The months between June and August are when wildfires are at their highest point in the US, and typically make up “wildfire season” – but according to the National Oceanic and Atmospheric Administration (NOAA), changes in climate are making wildfire season longer and more active.

Dr. Phil Klotzbach, Research Scientist Development of Atmospheric Science Colorado State University, explains that a major driver of hurricane season was La Nina, which influenced atmospheric circulation, resulting in lower levels of vertical windshear. Hurricanes effectively shift the jet stream in a way that produces drought conditions in the Southwestern US – intensifying the possibility of wildfires. While Klotzbach’s primary focus is on hurricanes, he points out that hurricanes and wildfires share similarities.

“When it comes to both hurricanes and wildfires, we see there's natural climate variability and likely climate change impacting additional warming that’s exacerbating the fire risk, and also more people and more stuff in harm’s way which is increasing damage potential from these storms.”

Climate risk is a complex, broader issue for the insurance industry. The capability to predict the courses of wildfires and to understand where they can occur, along with how devastating they might be – requires data that is constantly changing and further conversation around technology’s role.

The Insurance Perspective – Data & Technology

When these natural events get worse, losses increase along with the price of insurance. Or – insurance doesn’t get written altogether. This is a clear problem for the industry, the customer, and from a regulatory perspective.

Seth Rachlin, Ph.D., Executive Vice President at Capgemini explains, “Customers expect the industry to be there to protect them, wherever they want to live.” As a technologist, Rachlin often tries to think of ways technology can solution for these issues. Rachlin believes there is a delta between the data available and the data that is used, and insurance pricing could better reflect the risk being written, as well as the speed of response during times of crisis. Here, data and digital tools are huge opportunities for the industry.

Rachlin also states that personal line insurance could learn a thing or two from a commercial line by adopting a “risk management mindset”. For example, use of satellite and drone imagery, and other technologies to better account for homeowner risk. In his own example, Rachlin hired an engineer to assess his home’s wildfire risk. The engineer suggested the removal of some landscaping, making him question whether his insurance could have identified those risks upfront.

The need to use technology to understand wildfire risk really came onto the scene in 2017, according to Executive Vice President and Chief Risk Officer at CSAA Insurance Group, Jeff Huebner. He believes the industry can lean heavily on the emerging insure techs and data providers “so we can provide a solution differently tomorrow than we have historically.”

Risks are broader as fires are springing up in different places not previously known for wildfires. “You could underwrite your way into a big problem, and you don't even know it because this is not an area that you’re typically conscious of, and your old zone maps may no longer apply,” declares Rachlin.

This results in an element of surprise for consumers that is imperative for insurance companies to be conscious of. The industry essentially must throw older risk models out the window, because even weather models calibrated 3+ years ago no longer reflect the current state of risk. That’s why there’s now a push for a “Next-Generation Fire Behavior Model”. It’s important for a fire behavior model to be aligned with the current atmosphere. This is because fires tend to make their own weather, with wind speeds that push the fire forward to spread it. Clements adds, “If you want to understand how an extreme fire is going to behave, you can’t have a 2D fire map – you have to take the atmospheric profile into consideration.”

Huebner explains, “When policyholders buy insurance, they're looking for safety, security, and peace of mind.” CSAA takes proactive measures to protect their policyholders by mapping their locations in heavy fire-risk areas, making outbound communications, and educating them on the available policies. The challenge here is that the policies are difficult to read for consumers. “The policies aren't designed to be simple – they're designed to be quite complex.”

It was also noted that the industry must consider their influence on the building industry –how they can influence the codes so houses of tomorrow can withstand these climate problems? How can they invest into making our overgrown forests safer? “We need to come together and work upstream instead of thinking we are a financial-first responder coming in after an event,” observes Huebner.

Niels Jorgensen Ph.D., Data Scientist at Opterrix, reflects that the industry and its partners can “predict and prevent” wildfire risk by combining core records with data science to sustain profitability in the long run as risks transform across the U.S.

What can homeowners do?

“You're going to want to remove brush. The industry standard is 30 feet away from a home and that's because you want to mitigate the ability for a fire to move towards a home,” Jorgensen says of those who live in fire-prone areas. One of the other mitigation strategies that Opterrix implemented with third-party vendors are roof structure assessments to try and mitigate or change the materials that roofs are made of, because if embers from a wildfire land on certain types of roofs, they can devastate the home.

Wildland-urban Interface (WUI) codes are set in place to mitigate the risks of wildfire to people and properties and vary from place to place. These codes include things like:

  • Building materials and construction
  • Vegetation
  • Distance between structures and land features
  • Emergency vehicle access
  • Fire protection
  • Water supply

WUI codes are usually implemented and only partly enforced by local fire departments, although as Huebner claims, “It's hard to motivate the individual consumer to take those actions. It’s something we as an industry need to do a better job of, to motivate the homeowner.” It’s key for property owners to be aware of these codes as knowledge and action will not only protect life and property but save them money and frustration in the long run.

Wildfires cost billions of dollars to fight and recover from annually. A large part of wildfire prevention depends on knowing the conditions and risks in your location. Wildfires are becoming a bigger risk every year, making wildfire preparedness particularly important. Knowing how wildfires start in your region, and if your area is particularly vulnerable can help you better prepare. 

Thanks to the Insurance Information Institute, the Joint Industry Forum, and the esteemed panelists for the opportunity to partner on this panel.

Your go-to fire restoration partner

The primary goal of a fire damage restoration company is to reduce the risk of further damage to your home and to salvage as much as possible to ensure the property is restored to its pre-loss condition. Experienced restoration companies can assess the extent of damage that's occurred and provide you with a written estimate and work with your insurance company to get your claim settled as quickly as possible. ServiceMaster Restore is that partner.

Wildfire damage can be extensive. Even after the flames are extinguished, further damage can result from soot and smoke, which sometimes is even more destructive than the fire itself. Many of the items in a property, from flooring to furniture, may be made of synthetic materials that go from salvageable to un-salvageable quickly, making the overall loss greater. ServiceMaster Restore will combat these losses with an immediate response, as time is of the essence when it comes to fire restoration.

ServiceMaster Restore is your go-to restoration partner that provides a variety of services to help homeowners recover from fire damage. We use advanced cleaning methods and products to remove soot and smoke from walls, furnishings, and other surfaces. We also offer structural repairs and reconstruction services. ServiceMaster Recovery Management, the commercial restoration arm of ServiceMaster Restore, offers comprehensive fire damage restoration solutions, which include smoke and soot damage restoration and odor removal services for small and large-scale disasters. SRM also offers the industry’s only pre-disaster plan. We will analyze the impact fire has on your properties, evaluate the risk and solutions, and implement a game plan to get the business back to full operation as quickly and safely as possible.

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