Assessing wildfire risk to properties takes deep, diverse, large-scale data that’s been subjected to sophisticated analytics and scientific methods within an ecosystem of constant innovation. Taken in isolation, individual data sources may lack the substance needed to comprehensively assess wildland fuels and other risk factors. Given limited or biased data, even methods such as machine learning and artificial intelligence (AI) fall short when applied solely to aerial imagery.
These are important principles to understand with a risk as dynamic as wildfire, which is transforming from a seasonal to a year-round peril in some regions of the United States. A new Verisk white paper, U.S. Wildfire Risk Insight: An analysis of property exposure and wildfire damage in 2018, includes both an overview of the changing landscape around wildfire and a focused look at the 2018 season.
Wildfire activity and related losses have been increasing through a confluence of factors, such as development within high-risk areas and a range of phenomena potentially tied to climate change: warming and drying trends (more intense droughts) and early spring snowmelt in mountainous regions. Property-level risk assessments should be updated regularly to reflect the latest risk landscape.
Exposure tied to losses
Long-term data and analysis from Verisk show that 90 percent or more of wildfire-damaged property locations are usually associated with moderate to extreme levels of exposure. These locations can experience a high level of damage in terms of both scope and loss severity due to burning in wildfires. In addition, other types of wildfire-related claims—smoke and ash damage, additional living expenses due to evacuations, business interruption, and more—can occur outside of wildfire perimeters and near wildlands.
Verisk’s white paper includes an assessment of the impact of significant 2018 wildfires, supported by fire perimeter data from the Geospatial Multi-Agency Coordination, or GeoMAC, a web-based application for accessing online maps of current U.S. fire locations and perimeters. FireLine®, Verisk’s wildfire risk management tool, guides the analysis of risk factors seen within the perimeters of the fires covered in the report. Particular attention is focused on several major fires that affected California in 2018.
Better understanding, better underwriting
Deeper understanding of variables affecting the likelihood and severity of wildfires can help insurers better underwrite and manage wildfire exposure. Risk management strategies should consider factors that include property locations, geographic concentration of risk, and alignment of premiums with the level of exposure.
Location-specific characteristics—fuel, slope, and access—of individual properties significantly influence the level of wildfire hazard exposure, and this exposure is year-long. FireLine scores properties based on these attributes and delivers further insight on property locations within Special Hazard Interface Areas that are at risk from wind-borne embers during a fire. Fireline has also recently introduced Special Hazard Zones, which identify areas exposed to other losses, such as smoke and ash damage, additional living expenses due to evacuations, and business interruption beyond the perimeters of a fire.
Our white paper provides a closer look at the growing wildfire hazard, describes how it played out in 2018, and suggests strategies insurers can utilize to contain the risk within property portfolios.