The 2023 wildfire season so far is among the most destructive on record. With over 5 million acres burned in the United States and Canada, this year’s fires have caused billions of dollars in damage and displaced thousands of people.
For P&C insurance experts, the scope and implications of these wildfires is crucial to predicting future fires and preparing for potential claims. This year’s fires have also highlighted the need for insurers to better understand the risks of climate change and adapt underwriting and pricing practices accordingly.
WaterStreet Company’s P&C Insurance Solutions allow carriers to access all the data needed to form predictions.
The 2023 wildfire season in North America has witnessed a significant increase in wildfire activity compared to recent years.
The National Interagency Fire Center’s (NIFC) monthly and seasonal outlooks have indicated an above-normal potential for wildfire ignition and spread, primarily due to above-normal temperatures, below-normal precipitation, increased fuel loads, and unfavorable weather patterns.
The West Coast of the United States, including California and Oregon, has experienced some of the most intense and destructive fires due to a combination of dry conditions and strong winds. Other states historically prone to wildfires include Alaska, Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah, Washington and Wyoming.
To-date in 2023, California alone has experienced:
- 371,327 fire emergency responses
- 42 damaged or destroyed structures
- 222,863 burned acres
- 4 fatalities
Similarly, parts of Canada have been ravaged by wildfires, further underscoring the importance of continuous monitoring and preparedness by insurance professionals operating in these regions.
Wildfires in 2023 have inflicted substantial damage to both urban and rural areas. These catastrophes have not only caused direct property damage but have also given rise to secondary impacts, including health hazards due to poor air quality, economic downturns, and displacement of residents.
The Maui wildfire of 2023 stands out as one of the most devastating incidents in recent memory. The cause of the fire is under investigation and may have been started by a lightning strike or downed electrical wire.
A combination of factors led to this high-impact tragedy, including a long-term drought with dry vegetation, low humidity on the day of the fire, and erratic winds due to nearby storms.
As of August 12th, experts estimate the fires had burned over 3,200 acres and destroyed over 2,200 buildings. As of August 29th, approximately 115 fatalities have been accounted for and over 100 more remain missing according to the FBI.
Insurance experts must take note of the unique challenges posed by island-based wildfires. Consider factors such as limited access to firefighting resources and the interconnectedness of local ecosystems.
The financial toll of the 2023 wildfires is immense and still under calculation. Some estimations believe the Maui Wildfire alone may total $6 billion in economic losses.
The costs associated with firefighting efforts, evacuation operations, and property restoration have strained local and federal resources across the country. Property and Casualty Insurers are inundated with claims as affected homeowners and businesses seek coverage for their losses.
For comparison, here are the top 5 costliest individual wildfires in US history according to the Rocky Mountain Insurance Information Association, adjusted for 2023 dollars:
1. 2018: Camp Fire, CA – $12.1 billion
2. 2017: Tubbs Fire, CA – $10.2 billion
3. 2018: Wossley Fire, CA – $4.8 billion
4. 1991: Oakland Fire, CA – $3.5 billion
5. 2017: Atlas Fire, CA – $3.5 billion
These events highlight the importance of accurate risk assessment and pricing strategies by insurance experts to ensure the stability of the industry and the support of affected policyholders.
The 2023 wildfire season is not yet over. Insurers must be prepared for more frequent and severe wildfires in the years to come. Better prepare for future wildfires with the following tips:
Work with communities to develop fire mitigation strategies to prevent damage before it occurs. This may include moving live vegetation away from the sides of the home, clearing dead and dying branches, removing leaves and debris from the property, clearing gutters, roofs and decks of dead vegetation, and the use of metal instead of wood in building structures.
Develop more sophisticated underwriting and pricing models that take into account key factors behind severe wildfires. Capture more data in the underwriting process to determine locations prone to drought and if local forests are cleared routinely for fire prevention.
Expect a surge in claims during wildfire season in states prone to wildfires and consider ways to efficiently process claims. When insurers process claims quickly, the total claims cost can be minified and the policyholder can be satisfied with their coverage.
The 2023 wildfire season has been a stern wake-up call for the insurance industry, calling for adaptive strategies and supportive technology.
The WaterStreet Cloud-based P&C Policy Administration Suite is designed with Document Management at its core. All documents related to the policyholder are stored for simple retrieval when needed, keeping your administrators in one unified solution whether it comes to claims administration, policy administration, billing, or reporting.
Third-party integrations are essential for many carriers to bring important and supportive data into the system. These integrations can help assess location risks, provide a history of weather patterns, offer more background information on a new policyholder, allow for self-inspections, and many other unique capabilities. WaterStreet Company solutions are built with a robust API to connect to any number of third-party integrations.
Reach out to WaterStreet Company today to request a consultation and demo of our solutions.