Background on: Wildfires

 
The topic

As many as 90 percent of wildland fires in the United States are caused by humans, according to the U.S. Department of Interior. Some human-caused fires result from campfires left unattended, the burning of debris, negligently discarded cigarettes and intentional acts of arson. The remaining 10 percent are started by lightning or lava.

Over the 20-year period, 1996 to 2015, fires, including wildfires, accounted for 1.8 percent of insured catastrophes losses, totaling about $7.3 billion, according to the Property Claims Services (PCS) unit of ISO. The term “catastrophe” in the property insurance industry denotes a natural or man-made disaster that is unusually severe. An event is designated a catastrophe by the industry when claims are expected to reach a certain dollar threshold, currently set at $25 million, and more than a certain number of policyholders and insurance companies are affected.

Damage caused by fire and smoke are covered under standard homeowners, renters and business owners insurance policies and under the comprehensive portion of an auto insurance policy. Water or other damage caused by fire fighters to extinguish the fire is also covered under these policies. In California the California FAIR Plan covers residential and commercial properties located in brush and wildfire areas. Properties in those areas are subject to higher rates due to increased risk of fire. 

 
Recent developments

  • Research: A 2015 study by CoreLogic identifies almost 900,000 residential properties across 13 states in the western U.S. currently at high or very high risk of wildfire damage. They represent a combined total property value estimated at more than $237 billion. Of the total properties identified, 192,000 homes fall into the very high risk category, with total residential exposure valued at more than $49 billion.
  • California, Colorado and Texas are the states with the largest number of properties categorized as very high risk, with a combined property value exceeding 36 billion. The exposure jumps to $188 billion when properties at high and very high risk are included.
  • The cost of fighting wildfires reached $3.5 billion per year from 2002 to 2012 according to a report by Headwaters Economics, a nonprofit Research group.
  • Harvard School of Engineering and Applied Sciences researchers have concluded that by 2050 the number of wildfires in the West could rise by 50 percent, and across the U.S. the number would double.
  • 2017 Wildfire Season: From January 1 to October 6, 2017, there were 50,283 wildfires, compared to 46,618 wildfires in the same period in 2016, according to the National Interagency Fire Center. About 8.5 million acres were burned in the 2017 period, compared with 4.8 million in 2016. As of October 6, for the year so far, 2017 ranked higher in number of acres burned compared to the 10-year average. In early October, northern California was hit by numerous wildfires which led to at least 23 fatalities and destroyed over 3,500 structures.
  • According to Verisk’s 2017 Wildfire Risk Analysis 4.5 million U.S. homes were identified at high or extreme risk of wildfire, with more than 2 million in California alone. Losses from wildfires added up to $5.1 billion over the past 10 years.
  • 2016 Wildfire Season: There were a total of 5.5 million acres burned by wildfires in 2016. On May 1 of that year, a wildfire broke out in the Alberta city of Fort McMurray. The fire is set to become the costliest ever Canadian natural disaster for insurers, with 1,600 buildings destroyed and more under threat. Two fatalities are attributed to the fire and the entire population of about 90,000 were evacuated. The smoke from the fire could be seen as far south as Iowa.
  • 2015 Wildfire Season: The 2015 fire season set a new record for the number of acres burned in the United States. Between January 1 and December 30, 2015 there were 68,151 wildfires, which burned 10,125,149 acres, according to the National Interagency Fire Center. During the same period in 2014, 63,417 fires burned 3,577,620 acres. The previous record was set in 2006 at 9,873,745 acres.

 
Background

Researchers are discovering that embers blown by the wind during wildfires cause most of the fires that burn homes. Also, homes that are less than 15 feet apart are more likely to burn in clusters. In such cases, fire is often spread by combustible fences and decks connected to houses, a study by the Insurance Institute for Business & Home Safety (IBHS) found.

The risk of wildfires is likely to continue to grow as temperatures rise, lengthening the fire season, and more people move into steep forested areas once largely uninhabited. Thirty-eight states have wildfire risks, according to IBHS, and the risk of wildfires keeps growing as more homes are built in wildland areas, some five million in California alone. Among the preventive features recommended in the IBHS study were noncombustible siding, decking and roofing materials; covered vents; and fences not connected directly to the house. In addition, combustible structures in the yard such as playground equipment should be at least 30 feet away from the house and vegetation 100 feet away.

 
Total Potential Exposure To Wildfire Damage By Risk Category, 2014 (1)

($ billions)

State Low Moderate High Very high
Arizona $9.64 $0.98 $1.76 $1.57
California 75.84 61.92 89.35 16.10
Colorado 18.63 11.53 14.58 13.91
Idaho 9.20 5.56 3.71 2.62
Montana 14.63 4.43 2.29 2.40
Nevada 4.24 5.19 4.57 0.16
New Mexico 11.65 4.62 7.07 2.46
Oklahoma 31.92 16.77 0.03 0.00
Oregon 8.24 9.49 11.91 3.20
Texas 59.53 147.68 48.26 6.33
Utah 2.85 3.93 0.77 0.01
Washington 84.07 18.08 2.88 0.51
Wyoming 3.68 2.62 0.49 0.33
Total, states shown $331.27 $292.81 $187.66 $49.61

(1) Reconstruction value of single-family residences at risk.

Source: CoreLogic, Inc., a data and analytics company.

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Top 10 Most Wildfire Prone States, 2017

By households By percent
of households
Rank State Households at high
or extreme risk
from wildfires (1)
Rank State Percent of households
at high or extreme
risk from wildfires
1 California  2,044,800 1 Montana 28%
2 Texas 715,300 2 Idaho 26
3  Colorado 366,200 3 Colorado 17
4 Arizona 234,600 4 California   15
5 Idaho 171,200 5 New Mexico 14
6 Washington 154,900 6 Utah 14
7 Oklahoma 152,900 7 Wyoming 14
8 Oregon 148,800 8 Oklahoma 9
9 Utah 133,100 9 Oregon 9
10 Montana 133,000 10 Arizona 8

(1) Number of households is based on data from the 2010 U.S. Census.

NA=Data not available.

Source: Verisk Insurance Solutions – Underwriting and Verisk Climate units of Verisk Analytics®.

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Wildfire Losses In The United States, 2007-2016 (1)

(2016 $ millions)

(1) Adjusted for inflation by Munich Re based on the Consumer Price Index.

Source: © 2017 Munich Re, Geo Risks Research, NatCatSERVICE.

View Archived Graphs

 
Natural Catastrophe Losses In The United States, 2015 (1)

($ millions)

Event Number of relevant events (2) Fatalities Overall losses Insured losses (3)
Severe thunderstorm 37 114 $13,400 $9,600
Winter storms and cold waves 11 98 4,700 3,500
Flood, flash flood 12 86 3,800 1,100
Earthquake and geophysical 0 0 minor minor
Tropical cyclone 2 5 100 60
Wildfire, heat waves and drought 19 14 4,400 1,900
Other 4 7 minor minor
Total 85 324 $26,400 $16,100

(1) As of February 2016.
(2) Events that have caused at least one fatality or losses of $3 million or more.
(3) Based on property losses including, if applicable, agricultural, offshore, marine, aviation and National Flood Insurance Program losses and may differ from data shown elsewhere.

Source: Munich Re NatCatSERVICE; Property Claim Services®, a unit of ISO®, a Verisk Analytics® business. © 2016 Munich Re, NatCatSERVICE.

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Top 10 States For Wildfires Ranked By Number Of Fires And By Number Of Acres Burned, 2016

Rank State Number of fires Rank State Number of acres burned
1 Texas 9,300 1 Oklahoma 767,780
2 California 7,349 2 California 560,815
3 Georgia 5,086 3 Alaska 496,467
4 North Carolina 4,007 4 Idaho 361,649
5 Alabama 3,923 5 Texas 356,680
6 Florida 3,067 6 Kansas 349,829
7 Missouri 2,610 7 Arizona 308,245
8 Arizona 2,288 8 Washington 293,717
9 Tennessee 2,165 9 Nevada 265,156
10 Montana 2,026 10 Oregon 219,509

Source: National Interagency Fire Center.

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Top 10 Costliest Wildland Fires In The United States (1)

($ millions)

      Estimated insured loss  
Rank Date Name, Location Dollars when occurred In 2016 dollars (2)
1 Oct. 20-21, 1991 Oakland Hills Fire, CA $1,700 $2,746
2 Oct. 21-24, 2007 Witch Fire, CA 1,300 1,488
3 Oct. 25-Nov. 4, 2003 Cedar Fire, CA 1,060 1,362
4 Oct. 25-Nov. 3, 2003 Old Fire, CA 975 1,253
5 Nov. 28-30, 2016 Great Smoky Mountains Fire, TN 938 938
6 Sep. 12-14, 2015 Valley Fire, CA 921 933
7 Nov. 2-3, 1993 Topanga Fire, CA 375 578
8 Sep. 4-9, 2011 Bastrop County Complex Fire, TX 530 572
9 Oct. 27-28, 1993 Laguna Canyon Fire, CA 350 540
10 Jun. 24-28, 2012 Waldo Canyon Fire, CO 450 477

(1) Property coverage only for catastrophic fires. Effective January 1, 1997, ISO's Property Claim Services (PCS) unit defines catastrophes as events that cause more than $25 million in insured property damage and that affect a significant number of insureds and insurers. From 1982 to 1996, PCS used a $5 million threshold in defining catastrophes. Before 1982, PCS used a $1 million threshold.
(2) Adjusted for inflation through 2016 by ISO using the GDP implicit price deflator.

Source: The Property Claim Services® (PCS®) unit of ISO®, a Verisk Analytics® company

View Archived Tables

 
Additional sources

Verisk Insurance Solutions – Underwriting and Verisk Climate, units of Verisk Analytics. FireLine State Risk Report

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