Wildfire papers Wildfires and insurance Paul Kovacs Executive Director, Institute for Catastrophic Loss Reduction and Senior Vice President, Insurance Bureau of Canada January 2001 ICLR Research Paper Series – No. 11
Natural disaster damage losses paid by insurance companies have been doubling every five to ten years since at least the 1960s (Kovacs, 1999). The largest losses have been due to hurricanes, earthquakes, tornadoes, hail, winter storms and wildfires. This alarming trend is driven, in my opinion, by three primary factors – more people and property are exposed to Nature’s hazards; the frequency of many extreme weather events is increasing; and critical infrastructure is aging. This exposure is likely to rise further in the years ahead and scientists, practitioners and policy makers should work to reduce our vulnerability to Nature’s hazards.
The topic of this paper is urban/wildland fire, focusing on insurance and wildfires. Interest in this peril began with the California wildfires of the early 1990s, and this paper will set out the reasons why insurers may expect this interest will grow in the years ahead.
This paper will set out a brief history of the insurance industry, with a focus on fire risk; then describe the trends in major wildfire losses; and conclude with an overview of the role insurers will likely play in future wildfire management. The focus of this paper is on the experience of, and expectations for, insurers in the United States and Canada.