The flaming peril


The flaming peril / jphilipson

The Californian wildfires helped to cause a spike in losses in 2017, but 2018 has also had its fair share of blazes. Bermuda:Re+ILS investigates.

What do Northern California, London and the Swedish/Finnish border have in common?

The answer is perhaps a surprising one. This year they were all hit by wildfires, as drought conditions created the perfect conditions for parched grass, undergrowth and trees to go up in flames.

In most years the re/insurance industry’s view of natural catastrophes tends to be confined to hurricanes and earthquakes. In 2017 that changed, as wildfires made a significant contribution to the year’s nat cat damage bill.

According to Aon Benfield’s Weather, Climate & Catastrophe Insight 2017 Annual Report the wildfire peril had its costliest year on record for the insurance industry in 2017, with global losses nearing $14 billion.

The report stated: “Overall economic losses were even higher at more than $21 billion. 2017 was marked by two major outbreaks in California that led to the destruction of more than 10,000 structures alone.”

California burning

The October event in Northern California left at least 44 people dead and 185 others injured around the Napa Valley region. Total economic losses were estimated around $13 billion, of which $11 billion was insured. At the time Aon Benfield pointed out that this was by far the costliest wildfire outbreak ever recorded for the industry.

A separate major outbreak impacted Southern California in December that cost insurers in excess of $2.1 billion. Further wildfires throughout California and the Western US during the summer and early autumn months prompted economic losses in excess of 
$2 billion.

According to Aon Benfield, in 2017 Europe also recorded the largest extent of land burned by wildfires on satellite record, which dates back to 1980.

“For the first time in measurement history, fires consumed more than one million hectares of land across Europe,” the report said. “The worst affected country was Portugal where two significant outbreaks in June and October caused a combined death toll of 111, the highest on record.

“Economic losses due to wildfires totalled almost $1.2 billion and the local insurance sector declared the 2017 fires the costliest natural disaster in the country’s history, with payouts exceeding $295 million. It is worth noting that wildfires burned a remarkable 6.1 percent of Portuguese national territory in 2017.”

According to Aon Benfield the third-largest extent of land burned by wildfire in at least half a century was recorded in the US in 2017. Just 13 percent of the 2017 US wildfires were in California, but the fires in that state accounted for the vast majority of total US insured losses.

This was due to destructive fires that affected densely populated regions, including Sonoma, Napa, and Mendocino Counties in Northern California. The Thomas fire that impacted Southern California became what was then the largest Californian fire in modern history.

Among the notable causes of the 2017 outbreaks were strong Santa Ana winds and prolonged drought conditions. Many of the insured losses were in the wine-producing areas of the region, in which vineyards were damaged or even destroyed, adding to the economic and insured losses.

Portugal was also badly hit, marked by historical records being broken in terms of fatalities, financial impact, and areas burned. Unlike the other four major southern European countries, Portugal failed to mitigate the impact of wildfires in the long term. According to data from the European Forest Fire Information System, Portugal annually accounted for nearly 13 percent of land burned by wildfires in the EU in the 1980s, 22 percent in the 1990s, and 29 percent in the 2000s; the country’s share averages nearly 35 percent since 2010.

Aon Benfield said that this trend can be attributed to several interacting factors, including Portugal’s position in the path of strong Atlantic winds, rising temperatures and prolonged droughts due to a warming climate and ineffective strategies in fire mitigation. The company added that in Portugal one of the most prominent factors was widespread planting of eucalyptus trees, which can burn fiercely.

Although very important for the local paper industry, eucalypts are generally considered to be highly flammable. The fires in California were also made worse by the presence of eucalyptus trees, a relic of the railway boom that required large amounts of quickly-growing trees for railway sleepers.

The fires of 2018

There have been widespread wildfires this year, due to what was a very long and hot summer in many parts of Europe. In July a wildfire broke out in north-east London, which led to 247 acres of land being affected. More than 200 firefighters were needed to bring it under control. Although no houses were damaged a number were evacuated.

Fires also sprang up in other areas of Europe, including the Swedish/Finnish border—an area that is not normally affected by drought or fire.

In Greece wildfires in the Attica region killed an estimated 98 people and resulted in the destruction of more than 1,000 homes, an unknown number of cars and other property damage. The insurance bill is still being estimated, but so far it has reached at least £30 million ($39.5 million).

The headlines have also been dominated by the news of yet more wildfires in California. The Mendocino Complex fire broke out in July but wasn’t fully contained until mid-September. It affected half a million acres of land and caused widespread property damage.

In a statement California Insurance Commissioner Dave Jones announced that insured residential and commercial losses from the Carr and Mendocino Complex fires topped $845 million and the events are now counted among the most destructive wildfires in the state’s history. He also stressed that the year was not yet over, and that “the worst fires for 2018 may still be ahead for us”.

It’s a worrying thought. Some of last year’s California wildfires happened in December, a month when such events are not usual, thanks to the onset of cooler and wetter winter conditions. More fires might lie ahead in the last few months of 2018 and re/insurers will have to make sure that they are not complacent about the losses that might still be waiting for them—like kindling in the undergrowth.

Wildfires, California, 2017, 2018, losses, damages, drought

Bermuda Re