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Climate Change

Climate change increases wildfire risk in California

Majority of largest and costliest wildfires have occurred in recent years                

Man-made climate change is apparently making a significant contribution to the rising wildfire risk and major losses in California. Observation data covering recent decades show an increase in very large individual fires, while scientific studies have looked into the possible causes. A new analysis by Munich Re shows that the largest wildfires recorded in California since the 1930s have predominantly occurred since the beginning of the new millennium. The same period also experienced the most years with exceptionally high temperatures and unusually dry conditions.

26.03.2019
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The change in hazard levels is also reflected in Munich Re analyses on the development of wildfire losses: since the early 2000s there has been an increase in the incidence of particularly expensive billion-dollar disasters. Unprecedented levels were reached in 2017, with overall losses of around US$ 20bn. But even this record did not last long: in 2018, wildfire losses in California reached a new high of US$ 24bn, with insured losses of around US$ 18bn. Taking inflation-adjusted loss figures as a basis, around two thirds of the overall losses since 1980 have been covered by insurance.
Overall losses in US$ for relevant fire events in the United States 1980 - 2018

A variety of aspects were included in the new evaluation of the wildfire risk: the analyses show an overall trend towards higher temperatures and more years with extremely dry conditions. These observations were compared with data from the 20 largest Californian wildfires registered by the California Department of Forestry and Fire Protection since the 1930s. The result: the vast majority of the 20 largest individual fires have occurred in the years since the early 2000s – a period which has been characterised by an abnormally high mean of daily maximum temperatures and exceptional dryness averaged over the period from May to October. By comparing the data with climate models, climate research showed that the temperature increase observed in California is broadly consistent with climate change, although natural climate variability likely also contributed to changed rainfall properties.

Weather and wildfire in California

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.

Area burned in the western U.S. since 1984

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.

Risk Management Partners © shutterstock.com / sdecoret

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Munich Re has developed a new risk map for the US states of California, Colorado and Arizona to support wildfire risk management. Risk scores are calculated using Munich Re’s claims experience and can assist insurers with premium calculation and portfolio management.  Corporate clients outside the insurance industry can also benefit from the detailed risk assessment. The map is based on the latest hazard levels, and also factors in potential losses from wildfires that penetrate deep into (sub)urban areas, causing damage far from forests. You can find out more about Risk Management Partners’ wide range of software solutions for risk assessment at: 
https://www.munichre.com/risk-management-partners/en

Wildfires and climate change
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Eberhard Faust
Head of Research: Climate Risks and Natural Hazards
Markus Steuer
Markus Steuer
Consultant and wildfire expert, Corporate Underwriting
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