RMS estimates insured losses from California wildfires to be between $9 Bn and $13 Bn

Mohsen Rahnama, Chief Risk Modeling Officer, RMS, said: “Wildfire is now a major catastrophe risk that must be rigorously managed with the best data and model science. With increasing exposure due to properties near wildland areas and ongoing climate variability, insurers, policymakers, and homeowners must adapt to the prospect of more frequent and severe wildfires.”

California wildfires in

Newark, C.A:-
RMS, a global risk modeling and analytics firm, has estimated that the insured loss for the Camp and Woolsey wildfires in California will be between USD $9 and $13 billion ($7.5-$10 billion for Camp; $1.5-$3 billion for Woolsey). The estimate includes property and auto damage, including burn and smoke damage, business interruption (BI), additional living expenses (ALE), and contents loss.

 

The loss estimate utilized RMS’ forthcoming North America Wildfire High Definition (HD) Model to simulate the ignition, fire spread, ember accumulations, and smoke dispersion of the fires. The model’s findings were supported by damage reports from CAL FIRE as of November 18th, observations from displaced residents, and information from firefighting personnel.

 

The Camp and Woolsey events were among 15 fires that broke out in early November, 2018. The Camp and Woolsey Fires have currently burned a combined total of 245,000 acres, destroyed more than 12,000 homes and businesses, and killed 80 people. The Camp Fire, named for the road of its point of origin, is the most destructive fire in California history, with more than 11,000 structures burned and currently 77 fatalities. Notably, this fire season represents the second consecutive year with more than $10 billion in insured wildfire loss.

 

While the fuel landscape between the two fires differs significantly, with heavy forestry characterizing the Camp Fire (Northern California) and shrubland in the Woolsey Fire (Southern California), both developed under dangerous conditions that favor quick fire spread: low moisture, abnormally high temperatures, dry vegetation, and intense seasonal winds. Both traveled quickly through steep, hilly, vegetated terrain.

 

Mohsen Rahnama, Chief Risk Modeling Officer, RMS, said: “Wildfire is now a major catastrophe risk that must be rigorously managed with the best data and model science. With increasing exposure due to properties near wildland areas and ongoing climate variability, insurers, policymakers, and homeowners must adapt to the prospect of more frequent and severe wildfires.”

 

“In the wake of consecutive record-breaking wildfire seasons, we are hopeful that more focus will be placed on fire mitigation, safe construction practices, and community resilience. The forthcoming RMS HD Wildfire model, developed in partnership with leading insurers and fire experts, represents a step change in measuring wildfire risk, with a 50,000-year climate simulation, explicit ember and smoke simulations, and a vulnerability module calibrated on hundreds of millions of dollars of claims data. We are confident the model will contribute to the creation of safer communities that promote fire safety and awareness.”

 

Meanwhile Stephen Guijarro.analyst,S&P credit,explained that given their increased frequency and the lasting effects they leave on the communities’ impacted, weather-related events and catastrophes are a bit sobering for the insurance industry as they underscore the challenges for modeling and covering these risks,”

 

“Naturally, there is a great deal of unpredictability that requires vigilant risk management. Fortunately, the industry’s strong capital level may limit its impact to an earnings event and allows it to potentially keep writing this business.”

 

S&P states that the U.S P&C sector is well capitalised with record-high surplus levels reaching $761 billion as of 30 June 2018, according to Insurance Services Office, and reported net income after taxes of $34 billion.

 

On the primary insurance side, S&P says the risk from these wildfires is spread across the industry, but that AIG, Chubb, and Farmers have the largest exposures.

 


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