Insured losses from Colorado wildfires estimated at $450m

An estimate for the insured losses resulting from the Colorado wildfires has been released by the Rocky Mountain Insurance Information Association, a non-profit organisation. The 2012 wildfire season in Colorado has destroyed more than 600 homes now along with significant volumes of personal property. Adjusters continue to assess damages and work with communities to get an accurate picture of the loss toll but the RMIIA have released an estimate of $449.7m of insured losses.

The near $450m figure is made up of insurance claims information for smoke damage, additional living expenses, damaged and destroyed homes, as well as personal belongings and vehicles. These estimates make the Waldo Canyon wildfire the single most expensive wildfire on record in Colorado with insured losses totaling more than $352.6 million from approximately 4,300 claims filed so far. The Waldo Canyon fire is said to have destroyed at least 346 homes. The High Park fire in Colorado affected 259 homes and based on the nearly 850 insurance claims filed so far the insured losses are estimated to be $97.1 million. Neither of these estimates include commercial losses which could increase the totals.

“The 2012 Wildfire Season is a heartbreaking reminder to Coloradans that the wildfire threat is very real in our state and can exact a price that is both personally devastating and costly in terms of insurance damage,” said Carole Walker, Executive Director of the Rocky Mountain Insurance Information Association. “Insurance catastrophe adjusters have been on the ground in our state since early June, and the industry is prepared to help impacted residents recover and communities rebuild. The industry has many resources available to help Coloradans work through the claims settlement process.”

Wildfire is a peril which has been included in a number of catastrophe bond transactions in recent years. The Residential Re cat bonds from USAA include wildfire, although generally only with exposure in California. State Farms Merna Re III from 2010 held wildfire as one of the risks in the deal as well. All of these cat bonds with wildfire exposure have been transacted using an indemnity trigger however and it is likely that a fire would need to cause significant industry wide insured losses for a single insurers ultimate net loss (UNL) to become sufficiently large to impact a cat bond.

Wildfire is a peril which will likely gain increasing importance as weather patterns bring these dry periods, such as the U.S. mid-west has been suffering this year. Insurance coverage for wildfire and as a result reinsurance will receive more focus as losses from wildfires grow and we could begin to see it included in cat bonds more frequently in the future.