As wildfire frequency increases, we examine the state of the problem


The nature of wildfires means they are notoriously difficult to predict. However, there is a greater degree of certainty about the fact that climate change will increase the risk of insurers incurring wildfire-related losses. Meanwhile, to compound the problem, there is a propensity in some areas of the world – such as California, for example – to build new housing developments in areas that are at risk.

So, what can be done to mitigate the danger posed by wildfires?

An emerging risks report published by Lloyd’s last year defined wildfires as an uncontrolled fire, consuming vegetation in the countryside or a wilderness area, such as forest, woodlands, bushland, scrubland, grassland or peatland. It is difficult to identify loss trends due to wildfire occurrence because the number of wildfires that occur does not always correlate with the amount of land area burned. For instance, according to the Lloyd’s report, while a similar number of wildfires (just under 50,000) occurred in 2007 and 2010, the area of land burnt differed greatly – more than 600,000 hectares were burnt in 2007, while just over 200,000 hectares were burnt in 2010.

Where do wildfires tend to occur? More than 80% of wildfires occur in grassland and savannahs, primarily in Africa and Australia, but also in South Asia and South America, while the remainder occurs largely in forest and shrub-dominated regions of the world. ‘Most fires in grassland-dominated ecosystems have a low impact in terms of human or economic losses despite their high frequency,’ says the Lloyd’s report. ‘The less frequent fires in forest and shrublands in more densely populated regions have a much greater impact on lives and infrastructures – these regions include the mid- and south-western US, south-western Canada, Mediterranean Europe (ie Portugal, Spain, southern France, Italy and Greece), eastern China, and south- eastern Australia’. The report adds that particularly high-risk areas in terms of losses are the coastal parts of southern California with their steep slopes, highly flammable shrub vegetation and increasing population, and south-eastern Australia where the forests are dominated by extremely flammable eucalypt species.

Statistics compiled by Munich Re show that worldwide insured losses as a result of wildfires increased marginally to more than $600m in 2013 compared to the previous year, though this was less than the 2011 total of around $2bn. According to Lloyd’s, climate change is expected to increase average global temperatures and, consequently, in some regions, drought frequency and severity will increase. ‘This could lead to substantial increases in fire probability and potentially area burned’, Lloyd’s warned in its report.

However, Munich Re corporate climate centre head Ernst Rauch argues that human behaviour will actually be the most significant factor in the escalation of the cost of wildfires. “Over the last two to three decades, the frequency of loss relevant wildfires has increased – the driving force is human beings, they move into high exposure areas. If you go to California, for example, you have villas surrounded by bushland so those properties have increased the risk,” he says. A Swiss Re spokesman echoes Rauch’s view that the risk of losses due to wildfires is increasing because of new residential development. “[The risk is increasing] to the extent that urban developments happen in areas that are prone to wild fires,” she says. 

Rauch believes that climate change will lead to an increase in wildfires in some regions – due to the increased probability of heatwaves and droughts – but that this may be counterbalanced by improvements in firefighting measures. But he warns that currently the “speed of improvement in firefighting is not keeping up with causes of [wildfire] ignition.”

He adds: “Local emergency managers are not able to keep up.”

Rauch says the insurance industry has an important role to play in the coming years in terms of

making data available to local emergency managers. He adds: “We should provide information about the development of the risk, but it’s more important to increase resilience and reduce vulnerability.” Rauch suggests the adoption of policies that require the inclusion of spare land around properties, as well as the clearance of bush land.

The most important part of mitigating the risk of wildfires causing losses is land-use planning, according to the Swiss Re spokesman. She adds that this could potentially involve taking action to “separate forests and bush areas from settlements and provide access to potentially affected areas”. In addition, the spokeswoman adds that homeowners can lower their own risk level by carefully choosing their building materials and landscaping. She concludes: “Insurers should make customers and policymakers aware of risk and encourage mitigation measures by reflecting wild fire risk in premiums.”

In an effort to better understand the vulnerability of buildings to wildfire, the US-based Insurance Institute for Business & Home Safety (IBHS), whose members include international insurers, reinsurers and brokers, carried out a series of tests at its research centre. In the course of the research, the centre simulated ember and radiant heat exposures on different building components and assemblies. A 2011 report summarising the findings of the study explained that a building was designed and built by the IBHS for the ember exposure studies. The building – which included different roof coverings as well as windows and window screening – was rotated on a turntable to ensure each of the roof coverings was exposed to wind-driven embers. Among the conclusions of the study were that the positioning of vents and the effectiveness of flashing on roofs can impact on a buildings vulnerability to wildfire. Munich Re has highlighted the work of the IBHS as playing an important role in enhancing insurers’ understanding of wildfires.

However, Rauch warns that it is difficult to identify trends when it comes to the global phenomenon of wildfires. He says potential hotspots include anywhere with a “significant amount of forest,  or bushland – wherever you have lots of natural green cover, hot spells and dry air”. Rauch concludes: “Some regions are getting drier, but there are no clear trends on losses, it’s not possible to identify trends on a global scale.” So while insurers can mitigate the effects of wildfires, the industry still has a long way to go before it can gather enough useable and reliable data to let it better predict and model these destructive infernos.