Sacramento, Calif., no longer is No. 1 in safety from catastrophic property loss. San Diego is also out of the 10 Safest Cities list. And Phoenix was leapfrogged for the top spot. Why? This year, AIR Worldwide Corp., the Boston-based risk modeling firm, added the peril of wildfire to its suite of catastrophe models when compiling the Safest Cities List for Risk & Insurance®.
Since 1980, wildfires in the United States have been responsible for insured property losses of more than $8.5 billion (in current dollars), according to AIR, with most of those losses occurring in California.
Losses seem to be trending upward, despite frequency of wildfires in the United States holding relatively steady. That means that, like what's happening with hurricanes, more properties and higher exposed property values in high-risk areas are driving this flare-up in wildfire insured losses.
One reason could be that in fire-prone Western states more people are living in heavily vegetated, more rural areas. According to U.S. Fire Administration statistics, nearly 40 percent of new home development in the West is occurring where the wilds and suburbs meet. Compounding the risk, fire-suppression policies in these areas closer to human habitation aim to extinguish fires as quickly as possible, whereas wildfires in unpopulated areas are often allowed to burn.
The result is an unprecedented buildup of vegetation--read as "unused fuel"--in areas where the population and property values are growing.
Wildfire is an important component of many ecosystems. It promotes diversity in plants and wildlife. Property owners--particularly those within the so-called wildland-urban interface--of course have a less favorable view of wildfire.
To them, wildfires are a threat to life, limb, home and SUV. The costliest wildfire to date was the 1991 Oakland Hills fire, which wrought close to $2.9 billion in insured losses (trended to 2006 prices) and destroyed more than 3,400 homes. The 2003 Cedar and Old wildfires in Southern California cost insurers more than $2 billion and together torched more than 350,000 acres and 3,200 homes. In 2006, roughly 10 million acres burned in the United States--a new record.
Such insured losses from wildfires are influenced by factors such as local vegetation, weather and the vulnerability of affected structures. Topography can also affect fire spread. Fire travels upslope more readily than on level ground or on down-slopes.
So AIR has incorporated high-resolution digital elevation data from the U.S. Geological Survey. The modelers also captured the effects of wind speed and direction, including the Santa Ana winds in Southern California and the Diablo winds in the northern part of the state. Their model estimates the mitigating impact of fire breaks created in the course of fire-suppression activities and the exacerbating impact of impaired road access.
AIR's new wildfire model also accounts for 13 burnable fuel types, variations in moisture content and fuel loading down to a 30-meter resolution. Keeping the database up to date will be critical, as fuels change radically after a wildfire.
The model accounts, as well, for the flammability (or fire-resistance) of roof and siding materials in coming up with its estimate of damage and loss. Unlike hurricanes and earthquakes, though, wildfires seem to either completely destroy or only slightly damage structures--with little in between.
But like hurricanes, earthquakes and other CATs, wildfires strike irregularly, which makes the estimation of losses from future events difficult--and which has made models such a mainstream risk management tool today. Catastrophe models help insurers and corporate risk managers gauge their threat from unpredictable perils (where standard actuarial techniques--used to predict, say, car accidents--don't work), leading to a better understanding of and better preparation for their CAT risk.
December 1, 2006
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