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Historically, wildfires have been considered a California-centric risk exposure and with good reason as the top 10 costliest wildfires in the United States have occurred in the state—eight within just the past five years, according to the Insurance Information Institute.
Wildfire risk exposure, however, is not limited to California. Forty-five of the 50 states have regions and counties that are subject to wildfires and states east of the Rockies such as Florida, Georgia, and Oklahoma are, perhaps surprisingly, at risk.
In 2021, more than 58,000 wildfires burned more than 7.1 million acres across the U.S., according to the National Interagency Fire Center (NIFC), and while California tops the lists for both number of fires and acres burned, it still only accounts for 15% of U.S. fires and 32% of acres lost, making wildfires an issue for insureds across the country.
Retail agents and brokers should set appropriate expectations with insureds about the current wildfire market and work with clients on risk management strategies, including fire prevention efforts, to help insureds get the coverage they need.
As climate change progressively alters the weather and human infrastructure increasingly encroaches on wildlife areas, the frequency and severity of wildfires are expected to rise—as are the costs of insuring property in the geographic regions with the highest risk exposures.
For three of the last four years, insured losses from wildfires in the U.S. have exceeded $13 billion, according to the National Centers for Environmental Information at the National Oceanic and Atmospheric Administration (NOAA).
As insurance losses mount exponentially for weather and climate disasters, insurers and reinsurers are re-evaluating their risk exposures in certain catastrophe prone markets and are limiting their capital deployment in those areas. This trend in reduced capacity is making it even more challenging to secure adequate wildfire coverage for insureds.
A large volume of wildfire exposed risks—everything from a single location to large shared and layered programs—are falling out of the standard market. Most markets that will consider wildfire risk have implemented wildfire risk score maximums, property limit maximums, and restrictions or exclusions on building or exposure type.
Many markets are offering as little as $1 million in property limits and most are capped at $2.5 million. Very few markets are offering more than $5 million property limits at any one location, and some markets can’t layer business. Insureds are likely to find it difficult to buy the same limits as their expiring policies, and in some zones, rates could be five to ten times what they were.
The best thing you can do for insureds in a market like this is to understand their specific and unique risks so you can present their submissions in the best possible light to underwriters. The following are tips from Amwins wildfire experts:
Use a wildfire score to understand the specific wildfire risk.
If available to you, use enhanced wildfire modeling.
Consider standard fire suppression and mitigation tactics.
Provide wildfire mitigation plans with submission.
Get creative about capacity.
As the frequency and severity of natural disasters and severe weather increases, the ability to insure property in geographic regions with the highest risk exposures will likely continue to shrink.
To help insureds get the coverage they need, retail agents and brokers need to work collaboratively with their clients to understand their unique risk exposures and consider how mitigation and suppression strategies might make submissions more attractive to insurance underwriters.
Amwins expert brokers are your partners in providing insurance that best meets clients’ needs. Contact your broker today with questions about wildfire modeling and obtaining coverage for insureds in high-risk areas.
Contributors to this article include the following expert brokers from Amwins Property Practice: Executive Vice Presidents Jeff Conley, James Hemkin, Justin Lehtonen, Ryan Telford, Harry Tucker (also National Property Practice Leader) and Senior Vice President Brian Donovan.
As well as:
Tim Hendrickson, Senior Vice President, Casualty
Chris Platania, Senior Vice President, Actuarial
Kris Zebratski, Senior Vice President, Amwins Access Insurance Services – Personal Lines