This development is exacerbated by factors such as the decades-long accumulation of flammable brush as a result of past practices, the production of dead wood caused by insects such as the bark beetle fostered by warmer winters and dry summers, and the growth in construction activity in areas close to or even in forests at risk from wildfire. The town of Paradise in the foothills of the Sierra Nevada mountain range, which was almost completely destroyed by the Camp Fire in November 2018, is in the middle of a forested area and had experienced several close calls in the past.
Extreme billion-dollar losses such as those in 2017 and 2018 will remain events that do not occur every year. Nonetheless, as the hazard level and loss risk have increased significantly, measures to prevent losses are of enormous importance. On the construction side of things, building in areas very prone to wildfire should be avoided and many homes need to be made more fire resilient. In areas exposed to the wildfire risk, it is important to remove highly combustible brushwood.
For their part, insurers need to consistently include the raised wildfire risk in their models. These risks will remain insurable. As the (non-subsidised) price of cover must be commensurate with the risk, there is an incentive for policyholders to take effective measures to prevent and mitigate losses. Insurers will be there to cover the residual risk and ease the financial burden of the victims.
Recent studies have shown that it is not just California that has experienced an increase in the environmental conditions favouring wildfires. Similar developments can be seen in many parts of the world, including the European Mediterranean region or parts of Australia. Given the high exposed values in these areas, risk management needs to keep a close eye on these developments.