Wildfires put pressure on insurance premiums as blazes surge
Destructive wildfires across the globe have caused insurance premiums to rise in value of claims and is set to continue as trends show wildfires are more likely to occur, according to British insurance company Chaucer.
The insurance and reinsurance firm discovered US Wildfires have become an increased occurrence since the 2000s. Over the last 15 years an average of 32.4 to 41 fires a year were reported.
The frequency at which US citizens witness the fierce flames has risen by a rapid 30 per cent, found the study.
From 2016 to 2020 the study reported 205 wildfires across 40,000 acres, this compared to 173 fires the previous four years, and 157 prior to that based on data from the National Interagency Fire Centre.
Chaucer said the risk of wildfires causing damage had increased, with significant amounts of property at stake as many people have built into the Wildland Urban Interface, which were areas previously uninhabited.
Ellen Gyandzhuntseva, head of exposure management at Chaucer, said, “calculating the risk of wildfires is of key importance to the industry. The complexity of the peril is particularly challenging given how many shifting factors there are to consider.
With the severity and frequency of wildfires increasing together with social alertness to their risk mitigation, the challenge for insurers is to get comfortable that their models are suitably updated to reflect this trend in order to avoid being caught out by the peril,” she continued.
Wildfires have only recently been moved to an area of primary focus and methodologies used to forecast the probabilities and severities of them vary, which cause insurance premiums to differ.
Chaucer state predicting the outcome of wildfires is much more difficult than other disasters such as hurricanes, due to uncontrollable variables such as wind.
The state of California has seen its biggest wildfire in recent days and threatens poor air quality along the West coast and across the centre as 38 states are at risk of fires. The season has already hit Arizona, Oregon, Utah, New Mexico and more and is expected to be one of the ‘most destructive on record.’
Extreme weather changes have been seen around the globe this year such as US and Australian wildfires and Germany’s floods, as scientists warns the effects of climate change could be irreversible by 2030.