Fire on the Horizon: How Climate Change is Changing Wildfire Risk

As the climate continually changes, wildfire risk is changing too. Wildfires are larger and more intense than they have been in the past as wildfire "season" begins to expand to more of a year-round risk. By using real-time data and analytics to understand risk and accelerate recovery, insurers can more proactively help protect homes and businesses when wildfires inevitably strike.

Recently, the U.S. has been witnessing less variability and a more continual fire threat. The number and intensity of fires in recent years, including 2015, 2017, 2018 and 2020 is demonstrating the effects of long-duration dry conditions that in many places have been exemplified by persistent and record-setting severe drought.

These wide-ranging severe drought conditions have put 2021 on track to be like recent record-setting wildfire years. As of November 2021, this year ranks as 8th highest in number of fires and 7th highest in acres in the U.S. over the past decade. A handful of notable incidents on the west coast, the Bootleg Fire, Dixie Fire, and Caldor Fire, have demonstrated the risk of prolonged periods of drought on wildfire risk.

Figure 1: Wildfire Size and Total Weeks of Drought

How Catastrophe Models are Changing

Artificial intelligence and machine learning imagery processing has significantly improved the quality of property characteristic data. This improved data allows for consistent valuing and rating of all properties and better, more granular hazard risk assessments.

With property characteristic data in hand, catastrophe models must be able to model how severe physical damages could be, their potential financial impacts and what damages occurred after the event. These pieces of information are key to making sure hazard risk is properly understood, and in this way, an insurance company can be properly capitalized and ready in the event of a worst-case-scenario.

With hazard risk assessment solutions, insurers can:

(1) understand the deterministic wildfire risk for an address

(2) understand the deterministic non-weather fire risk for an address

(3) determine the probabilistic wildfire risk of a portfolio

Moreover, with weather verification solutions, insurers can use interactive, geospatial mapping to enable visualization and querying of weather and wildfire events, identifying and quantifying which policyholders were likely impacted.

With location intelligence in hand, insurers can determine fire protection information such as nearby fire stations, types, distance to, and score for an address.

A Changing Climate: Planning is more critical than ever

The environment is changing too rapidly to rely solely on wildfire loss history to plan for future wildfire mitigation and response. Probabilistic risk models, which can evaluate simulations of weather variation in today's environment, can produce planning scenarios relevant to communities now.

Looking ahead, insurers, city planners and homeowners each play an important role in reducing the devastating impacts of wildfires. While these natural catastrophes are often unavoidable, people can prepare for them.

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