California & U.S. wildfires heading into multi-billion dollar loss territory

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Wildfires burning across California continued their destructive paths in recent days, as hot and dry weather combined with strong winds fanned flames, while burns across other states including Oregon, Washington, Colorado and Utah all add to what is now anticipated to be a growing multi-billion dollar loss for the insurance and reinsurance industry.

california-wildfire-image-noah-berger-ap

Image: Noah Berger / AP.

In California, the wildfire situation worsened considerably again this week, with now more than 6,400 buildings and structures destroyed and thousands more damaged by the fires.

In particular, the North Complex of wildfires in Butte, Plumas, and Yuba county have destroyed over 2,000 structures in recent days, as the fires grew by almost 100,000 acres in just 24 hours and entered the top 10 largest wildfires in California state history.

Five of 2020’s wildfires in California are now in the top 10 largest fires ever to burn in the state and six in the top 20.

The August Complex wildfires in Tehama county are now the largest ever, at more than 470,000 acres.

The 2020 California wildfire season continues its unprecedented start and reinsurance and insurance-linked securities (ILS) interests will be watching nervously as the losses begin to aggregate towards levels where their capital support may be called on by insurers.

It’s not just California though, the hot and dry weather extends across more of the western United States and wildfires are burning in a number of other states.

Oregon has been particularly affected in recent days, with now more than half a million people having to be forced to evacuate their homes.

To provide scale, that’s around 10% of the population of the state of Oregon, a stunning statistic.

The Alameda wildfire in Ashland near the border with California is one particularly destructive blaze in Oregon, having destroyed hundreds of homes in the towns of Phoenix and Talent.

Impact Forecasting, the catastrophe and weather analytics and modelling arm of insurance and reinsurance broker Aon, explained that “record heat, exceptionally dry conditions, and strong offshore winds aided in a significant expansion of wildfire activity across parts of the Western U.S. during the first 10 days of September.”

With now more than 6,400 structures destroyed in California and another 1,000 plus destroyed in Oregon and Washington states, the financial costs of the U.S. wildfires are rising rapidly.

“Total direct economic costs from the fires across California, Oregon, and Washington were likely to reach a multi-billion-dollar threshold,” Impact Forecasting said, adding that “A large portion of those losses will be insured.”

“It is entirely likely that 2020 will become the sixth consecutive year in which global insured losses from the peril top USD2.0 billion (2020 USD).”

Aon’s Cat Insight team provided some data on billion dollar insured wildfire loss events.

“There have been 14 billion-dollar individual insured wildfire events in the official record (in today‚Äôs dollars after a U.S. Consumer Price Index adjustment). Nine of them have occurred since 2015. Eleven of the 14 events have been recorded in the United States, two in Australia, and one in Canada,” it said.

So far, 2020’s wildfires in the U.S. have not produced a billion dollar event, but the aggregated industry loss for the insurance and reinsurance market is surely now above a billion and looks set to continue rising, with months of wildfire season still left to run.

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