WILDFIRE RISK AT THE
Technology and Tools for P&C Insurers
extensive damage in Colorado; Austin,
Texas; and Oklahoma. According to the
National Interagency Fire Center, more
than 82,000 wildfires occurred across 10
million acres in the U.S. last year.
When the flames ceased and the smoke cleared 476 homes and other personal property were burned—some property completely de- stroyed. The homeowners, who lived in Bastrop County, Texas, just east of Austin, were devastated by last year’s wildfire that consumed
their homes and precious belongings.
The Bastrop Fire claimed the record for the highest amount of homes lost in a single
fire in the state’s history. The destructive blaze cost a total of $325 million in insured
losses. As high temperatures and severe draught are blamed for the wildfires in Texas, a
booming population moving into the moutnatins and foothills of the the Rocky Mountain Region is creating more risk, proving that wildfires are no longer a regional threat.
The picturesque scenes of Colorado, Utah, Wyoming, and New Mexico landscapes are
too tempting to resist. Meanwhile a growing threat rumbles throughout these areas
snuffing out the beautiful scenes and families’ dreams.
According to the Insurance Information Institute (I.I.I.) catastrophic fires account for
2. 2 percent of insurance losses, compared to 26 percent for tornadoes, 46. 3 percent for
hurricanes and tropical storms, 7. 5 percent for terrorism, 7. 8 percent for winter storms,
6. 4 percent for earthquakes, and 3.1 percent for wind/hail damage.
Wildfires have grown, however, from being regional or seasonal problems as the wildfire season throughout the U.S. often runs the entire year and in a variety of locations.
“At one time, wildfires were burning continuously in the state of Texas over an 18-month
time span,” says Lamont Norman, global product manager/insurance risk data for Pitney
Bowes Software. “It’s no longer a seasonal issue. It’s also not a regional issue.”
Pitney Bowes recently announced the launch of the first national wildfire risk software
solution for the insurance sector. The Pitney Bowes Risk Data Suite Wildfire Bundle for
property and casualty (P&C) insurers is available for commercial and private markets.
California is the leader in terms of wildfire loss, but in recent years fires have caused
The Underwriting Process
Insurers can now attribute accurate
wildfire risk ratings during the underwriting process to any commercial or private
location in the U.S. Underwriting calculations can integrate wildfire risk in much
the same way they account for flood risk
to establish correct policy pricing.
Norman pins part of the blame for the
fires on a global climate change, but he also
points to the encroachment on the wild
land/urban interface as another factor.
“Fires are becoming more threatening
and prevalent,” he says. Norman maintains
the science behind fire risk modeling has
been inferior. Most models were based on
what was fueling the fires, such as the vegetation grown in a particular area.
“Most models appear to ignore fire behavior modeling, multiple fuel sources
and the wild land/urban interface,” he
says. Models need to take into account
suppression capabilities, and more significantly, actual fire behavior science, according to Norman.
The data suite supports cat modeling
with fire behavior science provided by
Anchor Point Group Fire Management
Consultants. Pitney Bowes is working
with Anchor Point to change the sophistication of fire risk modeling.
“Most of that has to do with bringing in
fire behavior science,” says Norman. “[An-
chor Point] has a fire behavior analyst on
staff. There are only 42 of these analysts
in the U.S. Forty work with FEMA, one
doesn’t care about insurance, and the other
is working with Anchor Point Group.”
Norman compares these analysts to
someone who has a PhD: “They are few
and far between,” he says. “That experi-
ence is brought to bear with this solution.
Anchor has been doing this kind of work
for more than 10 years. They go into com-