How to Manage Wildfire Risk EffectivelyBy Michael Gannon | July 2, 2012
June has been a devastating month for wildfires in the western United States. Firefighters in Arizona, New Mexico, Utah, California, Wyoming, and Colorado are all battling blazes with varying degrees of success.
Although Verisk's Property Claim Services (PCS) has not yet issued its first claims loss estimates, the current fires are certain to add to insurer wildfire losses, which have totaled more than $4 billion during the past ten years, according to PCS. Only hurricanes, thunderstorms, and winter storms have caused more insured losses in the same time period.
Even though wildfire losses are impossible to predict, you can accurately price wildfire risk and manage exposure concentrations. Property location and the related risk attributes (fuel, slope, and access) are significant factors. By knowing the risk attributes of each location, you can limit exposure to levels that match your risk tolerance.
FireLine® is the wildfire risk management system from Verisk Insurance Solutions − Underwriting. You can use the system to assess wildfire risk at the address level in 10 states. FireLine takes advantage of advanced satellite data from Verisk's Atmospheric and Environmental Research (AER) to help evaluate the three primary factors that contribute to wildfire risk:
Fuel — Grass, trees, or dense brush can feed a wildfire.
Slope — Steeper slopes can increase the speed and intensity of wildfire.
Access — Limited access and dead-end roads can impede firefighting equipment.
With its custom geospatial algorithms, FireLine calculates a score for each factor, plus a cumulative risk score on a scale of 0 to 30. The scores help you support underwriting decisions and manage exposure concentrations. The scores are also part of rate filings in California.
Verisk Underwriting is tracking the progress of the current High Park and Little Bear fires to validate information supplied by FireLine. Here's what we're finding:
High Park Fire
The High Park fire is burning in northern Colorado, west of Fort Collins. The blaze erupted after a lightning strike on June 9. As of June 20, the fire had burned more than 68,000 acres, and containment had reached 55 percent. By June 20, the fire had destroyed more than 185 homes.
According to FireLine, this area is highly conducive to wildfire development, and the terrain is very difficult for firefighting. FireLine considers 98 percent of the burned area at high or extreme risk for wildfire loss.
Little Bear Fire
The Little Bear fire is burning near Ruidoso, New Mexico, about 180 miles southeast of Albuquerque. As of June 20, it had burned almost 43,000 acres and destroyed more than 240 homes and businesses. By June 20, containment had reached approximately 60 percent.
FireLine identifies the area surrounding the Little Bear fire as highly conducive to wildfire development. The terrain is very difficult for firefighting. FireLine considers 99 percent of the burned area at high or extreme risk for wildfire loss.
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