Rethinking how we look at wildfire risk
The American Academy of Actuaries explores how we can best address wildfire risk in a new issue paper.
When it comes to preventing and mitigating wildfire risk exposure, it has to be a team effort, says a new issue paper from the American Academy of Actuaries. The paper explores how recent western United States wildfires have pushed efforts to find ways to better understand this risk in order to properly address it.
“Federal, state and local government regulators and agencies, property owners and builders, actuaries and insurers all have a part in addressing this risk,” Jeri Xu, chairperson of the Academy’s Extreme Events and Property Lines Committee, which developed the issue paper, Wildfire: An Issue Paper—Lessons Learned from the 2017 to 2021 Events, said in a press release. “Fostering a healthy and fair insurance market for wildfire peril is a major public policy objective, and recent wildfire seasons have raised issues, challenges and opportunities for all stakeholders to consider.”
Wildfire modeling, especially when compared to hurricane and earthquake simulation models, is still in the early stages, which can make risk projections hard to pin down. According to the issue paper, other major barriers that prevent accurate wildfire modeling include uncertainty around human-related ignition; the impacts of climate change; and the effectiveness of early detection and suppression efforts.
Among the things the paper suggests we consider when addressing wildfire risk are how insurers can rethink the way they provide wildfire coverage consumers need while maintaining adequate and available rates; regulatory and legislative actions regarding risk reduction; and the increased attention on the issue of wildfires and the need to assess their risk.
You can view the issue paper from the American Academy of Actuaries in its entirety here.