Catastrophe risk modeller Karen Clark & Company (KCC) has announced the release of Version 1.0 of its US Wildfire Model.
This fully probabilistic model provides Exceedance Probability (EP) curves, PMLs, and AALs down to the location level and can be used to develop underwriting and pricing strategies that account for the impacts of climate change.
“Climate change is having an unequivocal and significant impact on the frequency and severity of wildfires,” said Daniel Bishop, KCC Atmospheric Scientist.
“The new KCC model captures these impacts and provides a credible view of future loss potential. KCC scientists have conducted detailed studies of the correlations between atmospheric variables and area burned in California and other states.”
“The most important atmospheric variable is the vapor pressure deficit (VPD) which is the capacity of an airmass to hold moisture beyond what is available in the atmospheric environment,” explained Daniel Ward, KCC Senior Atmospheric Scientist.
“Studies have shown the VPD to more accurately predict the total area burned per year than precipitation or temperature alone, and a recent KCC analysis shows that an increase in the VPD corresponds to an exponential increase in area burned.”
Along with the VPD, the KCC Wildfire Model accounts for high resolution fuels data, topography, wind speeds, road density, suppression activities, and other factors that influence the rate and direction of fire spread.
“Modeling wildfires is challenging,” commented Christopher Burke, KCC Senior Research Scientist. “The model must account for constantly changing exposure in the wildland urban interface (WUI), the flammability characteristics of different fuels, the likelihood of different wind patterns that aid fire spread, and the various factors that influence how successful suppression activities are likely to be. The KCC model is the result of years of research and scientific analyses on the ignitions and propagation of wildfires.”
“Wildfire used to be thought of as a secondary peril,” added Karen Clark, KCC CEO. “But the new KCC model shows insurers could face a loss in excess of $30 billion from an extreme fire in California, and they should be prepared for losses exceeding $10 billion with a significant probability based on today’s exposures and climate conditions.”
“The risk varies significantly by location and so along with providing PMLs and portfolio metrics, the model can accurately estimate expected loss costs for individual properties so insurers can price the coverage adequately.”
Glen Daraskevich, KCC Senior Vice President, further stated: “Insurers had started to back away from wildfire risk because previously they didn’t have credible models to price and underwrite the exposure. We’re very pleased to be delivering to the market a robust and credible view of risk that enables insurers to confidently write the business and capitalize on current market opportunities.”
