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Washington State: 700 Wildfires So Far

According to the Associated Press, Washington State has experienced nearly 700 wildfires this year. That’s just one example of a trend that has recently been the talk of the insurance industry. Although many wildfires don’t hit the threshold for a PCS® catastrophe designation — $25 million in insured losses — the topic is certainly on the insurance industry’s radar.

Increasingly, risk bearers are considering the capital markets as a place to transfer the wildfire risk.

Insurers and reinsurers considering such risk transfer should remember that they can use PCS data in an industry loss warranty (ILW). A wildfire instrument would work like any other ILW, but instead of using the total PCS industry loss estimate, it could refer to specific data from the PCS Catastrophe Bulletin, including:

  • losses from the wildland fire peril
  • catastrophe dates
  • states affected
  • insured loss by state
  • insured loss by line of business (for example, personal property)

A targeted ILW could provide a new risk transfer alternative at a time when the industry is reexamining the wildfire peril.

Joe Louwagie

Joe Louwagie is assistant vice president, Property Claim Services (PCS). PCS is a Verisk Analytics (Nasdaq:VRSK) business.

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