Insured losses from U.S. wildfires are growing as frequency decreases

The potential insured losses resulting from U.S. wildfires are growing even as their frequency decreases because close to 99 million Americans reside in the wildland urban interface (WUI), according to the Insurance Information Institute (Triple-I).

Insured losses are influenced by the extent of development in the wildland urban interface.

Developers, homebuyers, lenders, and other stakeholders must seek to understand and respond appropriately to the relationship between a property’s WUI proximity and its risks

Dale Porfilio, chief insurance officer, Triple-I

The WUI is the zone of transition between unoccupied and developed land, where structures and human activity intermingle with wildland and vegetative fuels.

More than 46 mn homes with an estimated cumulative value of $1.3 trln are situated within the WUI, the U.S. Fire Administration reported in 2022.

Insured losses from U.S. wildfires are growing as frequency decreases

The U.S. experienced staggering losses caused by wildfires, especially in the wildland urban interface (WUI). Wildfires in these areas resulted in devastating losses of life, health, and property, and cascading financial losses.

Considering certain land and fire management decisions, along with climate change, wildfires are now moving with a speed and intensity previously unseen.

Additionally, recent population growth and decades of growing housing development in the WUI is leaving nation vulnerable to further loss.

Without significant collaborative efforts to facilitate change, our nation will continue to suffer catastrophic wildfire losses in the WUI.

Number of houses in WUI relative to total houses in the state

Number of houses in WUI relative to total houses in the state
Source: WUI

To trigger a sense of urgency and motivation to act, the U.S. Fire Administration, in collaboration with the U.S. Department of the Interior and U.S. Forest Service, developed this report, “Wildland Urban Interface: A Look at Issues and Resolutions,” to document opportunities for organizations and partners at every level to work with each other and resolve the challenges identified in the WUI.

Developing federal, state, tribal, territorial, local and community wildfire prevention and control initiatives as recommended in this report will raise awareness about the WUI fire problem.

These recommendations, if heeded, will also assist in the creation of greater fire-resilient communities, save lives and property, and help all partners better plan and prepare for, mitigate against, and safely and effectively respond to wildfires in the WUI.

The following are significant losses due to wildfires in the United States over the last decade

  • 2011 — Texas: 5,900 structures damaged or destroyed.
  • 2012 — Colorado: 3 civilian fatalities and 605 homes lost on the High Park and Waldo Canyon Fires, according to National Interagency Fire Center.
  • 2013 — Arizona: 19 firefighter fatalities and 129 structures destroyed in the Yarnell Hill Fire.
  • 2014 — California: 341 residences destroyed; Washington: 342 residences destroyed.
  • 2015 — Washington: 3 firefighter fatalities, over 1 million acres burned, and 342 residences destroyed.
  • 2016 — Gatlinburg, Tennessee: 14 fatalities, 2,121 residences destroyed.
  • 2017 — California: 7,778 residences destroyed; Florida: 44 residences destroyed.
  • 2018 — Paradise, California: 88 civilian and firefighter fatalities and over 18,800 structures lost in the Camp Fire.
  • 2019 — California: 315 residences destroyed; Alaska: 57 residences destroyed.
  • 2020 — Oregon: 11 civilian and firefighter fatalities and more than 3,000 structures destroyed; California: 4.2 million acres burned, more than double the previous record, 10,500 structures destroyed, and 33 civilian and firefighter fatalities.
  • 2021 — California: 1,329 structures destroyed, 3 firefighter injuries and 1 firefighter death, and over $1 billion worth of timber resources destroyed.
Insured losses from U.S. wildfires are growing as frequency decreases

In a report published in March 2023, and cited in Triple-I’s Issues Brief, the Swiss Re Institute said, another longer-term trend is the doubling of the share of natural catastrophe insured losses from wildfires over the last 30 years.

Mitigation key to declines

The improvements in frequency and severity are likely due to investments in mitigation. State and local authorities have worked hard and invested a lot of money to mitigate the human causes of wildfire. The Insurance Institute for Business and Home Safety (IBHS), which provides science-based wildfire research, in 2022 launched the Wildfire Prepared Home designation program to help homeowners protect their property from wildfire.

In addition, the federal Infrastructure and Jobs Act of 2021, signed into law by President Biden, includes:

  • $600 million to convert seasonal federal wildland firefighters to permanent year-round positions and increase pay for federal firefighters by up to $20,000 per year;
  • $3.3 billion for critical wildfire risk-reduction efforts;
  • $5 billion for utilities and grid operators to bury power lines and install fire-resistant technologies to prevent wildfires, as well as expand use of micro-grids to reduce the impact of power shutoffs; and
  • $3.5 billion for the weatherization assistance program to help homeowners make energy-efficiency and fire-resistance improvements to their homes.

U.S. Wildfires in 2000-2023

U.S. Wildfires in 2000-2023
Source: Triple-I

The correlation between wildfire risk and geography underscores the importance of data gathering and scrupulous analysis when insurers underwrite and price their auto, business, and homeowners policies.

Even within states that are heavily exposed to wildfire risk, potentially profitable insurance opportunities exist. The use of sophisticated modeling tools is critical to sound, accurate underwriting.

The August 2023 wildfires in Hawaii were among the deadliest in U.S. history, yet this year the nation is on track to have its fewest number of wildfires dating back to 2014.

The total number of U.S. wildfires has generally been on a downward trajectory over the past decade except for 2017 and 2018. The latter years were when the nation’s three costliest wildfires, as defined by insured losses, occurred in California.

Since that time, state and local authorities have invested heavily to mitigate the human causes of wildfires.

The federal Infrastructure Investment and Jobs Act of 2021 included billions of dollars to support wildfire-risk reduction, homeowner investment in mitigation, and improved responsiveness to fires.

The private sector also has played a role in reducing wildfire risks. For instance, the Insurance Institute for Business & Home Safety (IBHS), which is financially supported by insurers and provides science-based wildfire research, launched its Wildfire Prepared Home designation program in 2022 to help California homeowners protect their property, according to Triple-I’s latest Issues Brief.

Reduced land management practices and dangerous increase of fuel buildup

For many decades, fire-dependent landscapes or ecosystems like prairies and coniferous forest that depend on fire for germination and reproduction, especially in the West, have not been maintained.

This lack of maintenance is due to various factors, including a lack of workforce capacity, funding, restricted prescribed burn opportunities, air quality impact and public perception.

Fire suppression over the last century and past land management decisions, including reduced use of mechanical methods and prescribed fire as land management tools, have resulted in over 100 million acres of federal land at high or severe risk to wildfire, and many more acres of state, tribal and private land are also likely at risk (US Government Accountability Office).

The long-time exclusion of fire and mechanical thinning in these areas has contributed to unhealthy forest, grassland and brush conditions, including increased ground fuels and “overstocking”.

These overgrown and dense natural areas are vulnerable to damaging effects of drought, disease and wildfire. Changes in America’s grass and rangelands have also increased the impacts of wildfire.

The proliferation of invasive species, such as cheatgrass, has altered fire regimes and places these important habitats at risk.

Nataly Kramer   by Nataly Kramer