It’s only March, and the U.S. has already seen 7,112 wildfires, 37 percent more than the 10-year average and another sign that the frequency and intensity of fires has become a “new normal” that puts lives, communities, ecosystems, and insurers at risk.
Wildfires are breaking out outside the traditional fire season, driven by changing climate and weather patterns. Warmer temperatures are melting snow earlier and delaying fall precipitation, resulting in longer dry spells that increase the risk of wildfires.
Fire seasons that used to last four months are now often stretching to six to eight months, with winter wildfires becoming increasingly common in states like the Carolinas, New Jersey, New York, California, Arizona, Colorado, New Mexico, Texas, and Tennessee.
Forest fires intensify in new areas
According to Firas Saleh, director of North American wildfire modeling at Moody’s, the increase in wildfire activity in the Carolinas and other parts of the U.S. highlights the need for comprehensive risk preparedness that extends beyond traditional fire-prone regions.
“Wildfires are probably one of the hazards that can be mitigated,” Saleh says. “It’s not like hurricanes. It’s a hazard that we can mitigate right now.”
Despite the increase in wildfires and the threat of more to come, Saleh says there is still a lack of fire awareness in many parts of the country, even in places prone to hazardous conditions.
“The increase in wildfire activity in the Carolinas and other parts of the U.S. highlights the need for comprehensive risk preparedness that extends beyond traditional fire-prone regions,” he says.
New climate models created
Moody’s has released new comprehensive climate models to help stakeholders manage wildfire risk, including insurers, utilities, policymakers and asset managers. The models cover insurance pricing, credit underwriting, portfolio management, community adaptation planning and investment, and regulation.
“The models include a variety of extreme urban fire scenarios,” Saleh said. “By comprehensively capturing the risk profile, our models provide unprecedented insights to help the market understand and prepare for these catastrophic events.” While wildfires are a natural phenomenon, he said, the real risk comes from urban fires where the fire spreads from structure to structure, causing significant impacts, as seen in the Los Angeles County wildfires. High winds, dry vegetation, flammable building materials, and proximity to vegetation all contribute to the increased risk.
Los Angeles’s Most Destructive Fire
“This firestorm is the most destructive and multifaceted wildfire in U.S. history, with an unprecedented level of urban fire,” he said. However, this was not a “black swan”, given the rising risk of wildfires in recent years.
Saleh said there are sometimes simple mitigation approaches, such as having mesh over vents to keep embers from flying in. “And of course there are community-level or even neighborhood-level mitigation efforts,” he said. “I think we’re seeing a more systematic approach to mitigation that includes everything from vegetation management to structural hardening.”
Moody’s has surveyed about 30,000 properties or buildings in the Los Angeles area, Saleh said, and more than 50 percent were completely destroyed. Others had minor or moderate damage or were completely intact.
“So we at Moody’s look at that data and try to understand why certain structures survived and others were destroyed,” he said. “We look at the year they were built, the material they were built in, the type of roof, the windows — all that detailed information to understand the behavior of a wildfire.” The Los Angeles wildfires in January resulted in unprecedented insurance losses. Experts have estimated that insured losses ranged from $25 billion to $45 billion, and total property and capital losses ranged from $76 billion to $131 billion.
Severe impact on the insurance industry
The losses highlight the severe financial impact of wildfires on the insurance industry and the difficulties of accurately assessing damage from such large-scale disasters. The losses have also worsened the state’s insurance crisis, with some insurers refusing to write fire insurance policies until emergency mitigation measures are in place.
Moody’s is partnering with the Insurance Institute for Business and Home Safety to conduct experiments to better understand the nature and risks of wildfires. In particular, they are building entire structures and setting them on fire to study them.
“They have a huge wind tunnel that generates 30, 40, or 50 mph winds, and they set the object on fire to study its behavior,” Saleh said.
Despite the growing threat, Saleh says he is optimistic that mitigation strategies will improve, spread, and succeed.
“We are seeing an increase in the frequency and severity of wildfires, but at the same time, I think it’s important to note that technology is on our side,” he said. “We are seeing huge advances in computing power. We are seeing advances in how we can better capture attributes that we couldn’t capture before. We can model at a resolution and fidelity that we weren’t able to do 10 or 15 years ago.”