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California’s Wildfires Impacts on Utility Rates and Insurance Premiums

Looking Back at 2017-2018 Fire Seasons in California

In 2017 the state of California experienced a fire season that seemed to surpass any other in recent memory. This disastrous fire season was then exceeded in terms of lives lost, and destruction to property by the 2018 fire season. In October 2017, the Tubbs Fire took its place as the most destructive wildfire in California’s history by destroying 5,636 structures, and killing a total of 22 people. In the wake of this tragic event that befell the Northern Bay area communities, the people of California were wishfully thinking that the reappearance of these extreme fires would subside for an extended period of time. These optimistic thoughts were quickly given a reality check when the Camp Fire destroyed the community of Paradise, CA in the matter of hours. Fire officials continue to diligently complete the search for missing citizens, and damage inspections of the surrounding areas, the numbers below are current up to when this was published. As of right now the total number of destroyed structures is 18,804, which over triple the previous most destructive fires record. The death count for this incident is staggering as well with the current number being 85 human lives lost during this incident. The Thomas Fire in December was the second record setting fire of 2017, taking the position of most acres burned. This record was overtaken this year by the Ranch Fire, which burned 410,203 acres near Clearlake, CA. With these disturbing fires seemingly getting worse every year, what do the upcoming changes look like for the average homeowner in California?

Insurance

For home insurance carriers, the State of California is being assessed as a risk versus gain analysis, on a geographic, case-by-case basis in relation wildfires. These companies are becoming more and more hesitant to expand into the more rural reaches of California. In some areas, certain home insurance carriers have resigned to no longer writing new business due to the extreme wildfire risk that has been becoming ever so prevalent in recent years. These same companies will be quietly removing their presence from these aforementioned areas by no longer renewing policies when the term of their legal obligation is up, at which point a non-renewal notice is issued. In efforts to account for the increase in economic losses that the insurance carries have, and will be seeing due to wildfire, there is no doubt that premium rates will be going up. These increases will be seen across the entirety of the state, but as you move into the more fire prone areas, otherwise known as the wildland urban interface, the rate at which the increase will occur will be more dramatic.

To protect the residents of California, the state legislature has passed a bill clarifying that catastrophic losses to insurance companies cannot be passed onto ratepayers in one large lump sum. What will eventually happen is, there will be a steady increase in yearly premiums over a number of years to assist with the companies trying to recoup from these devastating events. There is a similar process when a utility company is found to be the root cause of a wildfire.

Utility Companies

When utility company’s equipment has been found to be the cause of a fire, these entities can be liable for shouldering the costs of fire suppression, damages to structures, and damages to other economic and natural resources as well. The amount of money that these factors add up too, can be quite staggering.

Digram

This diagram shown in the paper “Wildfire Costs in California: The Roll of Electric Utilities” written by Wharton University of Pennsylvania, gives a visualization of the legal process post wildfire.

In the case of investor owned utility companies, such as Pacific Gas and Electric, how these costs are paid for is determined by the CUPC (California Public Utilities Commission). Since rates are fixed for publicly owned utility companies, the recoupment of the costs in relation to a fire have to be evaluated by the CUPC before the burden can be placed onto ratepayers. The CUPC evaluates the Utilities request to have the ratepayers absorb this cost by determining if the company has abided by acting “reasonably and prudently” in relation to the failure of their equipment. If the utility company is found to be negligent in anyway, this request to pass the financial burden onto the ratepayers would be declined.

Sources:

https://www.cnbc.com/2017/12/07/californias-big-fire-losses-in-2017-wont-mean-huge-insurance-hikes-in-2018.html

https://www.insurancejournal.com/news/west/2018/08/02/496904.htm

https://www.cnbc.com/2018/11/16/fire-plagued-ca-wont-let-insurers-cram-through-big-rate-hikes.html

https://www.mercurynews.com/2018/08/20/as-wildfire-costs-reach-new-heights-will-homeowners-get-socked-on-insurance/

https://riskcenter.wharton.upenn.edu/wp-content/uploads/2018/08/Wildfire-Cost-in-CA-Role-of-Utilities-1.pdf

https://www.thebalance.com/wildfires-economic-impact-4160764

Typhoon Yutu

Typhoon Yutu: The Most Powerful Storm of 2018 To Hit a U.S. Territory

On October 21st, 2018, Typhoon Yutu began its development as a tropical depression, east of the Northern Mariana Islands, a US commonwealth.  Just hours later, the storm reached tropical storm strength over the warm waters of the Pacific Ocean. During the period of the next three days Yutu would intensify to a Category 5 Typhoon. Around 2:00 AM on October 25th, Yutu made landfall on the Northern Mariana Islands. Satellite imagery shows the eye of the storm passing directly over the island Tinian (population 3,136), completely encompassing it as the devastation within the eye-wall continued on the surrounding islands of Saipan (population 52,263), Rota (population 2,477), and Guam.  The damage received during the typhoon’s arrival would leave the island communities nearly unrecognizable. Yutu would be recorded as the strongest storm to impact a US territory in 2018, and the strongest to impact the Northern Mariana Islands in recorded history.

Typhoon, Hurricane, Cat 5

This image depicts the Northern Mariana Island chain’s location in the midst of Typhoon Yutu.

Super Typhoon Yutu’s Conditions Upon Landfall in the Northern Mariana Islands

Sustained Winds: Sustained 180 mph, Gusting over 200 mph

Storm Surge: Up to 20 feet

Rainfall: Up to 10 inches

The tone of the statements released by officials leading up to the storms arrival was indicative of the damages that would be seen in the days prior to Yutu’s landfall. The National Weather Service office in Guam released this frightening message before the storms arrival, “Most homes will sustain severe damage, with potential for complete roof failure and wall collapse. Most industrial buildings will be destroyed.” These comments proved to be unnervingly valid once the storm had passed.

After the preliminary aerial damage assessments were completed on October 29th, the figures shown below give insight to just how severe the damages are.

Damage inspection, Hurricane, Typhoon

This figure shows the results of the preliminary damage inspections. Officials conducted these inspections during the first fly over after the storm had passed.

These aerial images released by DigitalGlobe give further testament to the absolute devastation that occurred in the disaster area.

It is estimated that these communities will be without power for months in the wake of Typhoon Yutu. Saipan currently has 99 percent of its community without power, Tinian is 100 percent out of power, and the small island of Rota has restored power to 99 percent of the island.

In the 96 hours after the storm’s passing, 121 storm related emergency room visits were recorded. Unfortunately two lives have been lost from this community during this natural disaster.

Yutu continued on its path of destruction after it passed over the Mariana Islands, its next stop, the Philippines. Even though the storm’s intensity, in terms of wind speeds was not as great in this impact area, the devastation was still staggering. With the Philippines  already saturated with moisture from the Typhoon Mangkhut, the unwelcomed rainfall from Yutu exacerbated the troubles for locals in the mountainous areas of the Philippines. As the storm hit, the rainfall caused massive landslides throughout the countryside. Roads throughout the impact area have been blocked by debris making recovery efforts difficult for the first responders. As the recovery process is continues, it truly paints the picture of how bad these events really are for these communities.

Read further:

https://www.cbc.ca/news/world/super-typhoon-yutu-destruction-1.4879117

https://www.cbc.ca/news/world/typhoon-yutu-philippines-1.4883540

https://www.washingtonpost.com/weather/2018/10/24/category-typhoon-yutu-with-mph-winds-is-set-ravage-us-territories-saipan-tinian

https://earthobservatory.nasa.gov/images/144137/super-typhoon-yutu

https://www.washingtonpost.com/energy-environment/2018/10/24/extreme-category-typhoon-yutu-makes-devastating-landfall-northern-mariana-islands-us-commonwealth/

 

 

Fire Regime

Five Years of Wildfires Devastate Lake County, an Insurance Risk or Opportunity?

With Lake County now holding the title of the largest fire in California’s recorded history, the Ranch Fire of the Mendocino Complex, it leaves one to wonder what exactly it is that’s producing the conditions for these enormous fires to thrive in this area. It has been estimated that in the last 5 years, over 55 percent of the surface area in Lake County has burned in wildfires. It has become an unfortunate understanding of the residents that have chosen to settle in this county that it is not if a big fire will occur, but rather, when will the next one occur. In regards to wildland fire, there are three main elements that are known to have the most impact on fire behavior: weather, topography, and fuels. Unfortunately for Lake County, the area has all three of these influential factors working against the fire regime of the area.

Fire History

This map displays all of the fires inside a 1 mile buffer of Lake County that reached over 100 acres since 2012.

Topography

Lake County is located in the Coastal Range of northern California, on the west side of the Sacramento Valley. Lake County resides in a mid-altitude area that is high enough above sea level to be above the influence of the marine layer, but not high enough in the mountains to feel impacts of the cooler upper atmospheric air. In  the center of the county rests Clear Lake, which is the lowest point in elevation throughout the entire area. Surrounding this geographic feature are seemingly endless mountains, hills, and valleys extending in every direction until they arrive in the northern reaches of the Mendocino National Forest. These areas of tremendous elevation variation are where fires tend to thrive. Fires are able to take advantage of these slopes to preheat the fuels up-slope from the fire, while simultaneously utilizing the convection column of hot gasses being funneled through these drainages to fuel the fire’s spread.

Weather

The local weather patterns of Lake County tend to have a negative impact on fire behavior in the area. During fire season, the predominate winds blow from the northwest, with the occasional shift coming from the northeast, bringing the warm and dry air from the northern portion of the Sacramento Valley into the area. On the extreme side of the spectrum are Foehn Wind events that cause extreme fire behavior when they occur. Foehn or “sundowner” winds bring hot, dry air into the area, with an uncharacteristic down-slope flow that allows fire to spread at unfathomable rates. When these events occur, fires can continue to burn actively through the night which is usually the time when fire behavior begins to moderate.

Fuels

Lake County is relatively diverse in terms of the vegetation species throughout the county’s boundaries. Nearly every major fuel type that exists is contained within the county including grasslands, oak woodlands, brush, mixed conifer forests, and hardwood forests. Due to the wide spectrum of vegetation species here, fires can range from low intensity grass fires, to extremely high intensity forest fires. The map below depicts the vegetation classifications throughout the entire county. Starting in the southern areas of the county, the predominate fuel type is comprised of annual grasses and oak woodlands. As you move up in elevation on both the east and the western side of Clear Lake, the fuel type primarily changes to a chaparral-based fuel bed. Progressing further north into the Mendocino National Forest, the dominant fuel type changes once again to one of a heavy timber, mixed conifer, and hardwood forested area.

Vegetation

This map depicts the vegetation types throughout Lake County. Visualizing this data clearly shows the predominant vegetation type shifting as you progress north, from the southern border of the county.

The reasons above are all variables in what seems to be a devastating half-decade of fire history for the Lake County region. The complicated wildfire situation in this area has been influenced by the recent years of drought, which has decreased the available moisture in the region, drying out the vegetation and furthering their susceptibility to fire. Lastly, Lake County has had an increase in residency due to increasing interest in the Napa/Sonoma Wine country. With more human influence comes the increased probability of fires igniting.

Insurance risk or Opportunity?

Will this information impact insurance companies when considering existing policies, writing future business, or even adjusting premium rates in this county? Does this amount of fire activity in such a small time frame deter insurance carriers from writing new business in these areas? These recently charred areas should be considered as an opportunity to obtain new clientele due to the diminished risk from wildfire in the upcoming years based off the lack of vegetation. Some factors to take into account would be the return interval rate of fire in each of these fuel types. This knowledge would give an estimation of how long that specific site will have before it is ready to burn if the new vegetation is the same species. For example, Chaparral brush which, is a large portion of Lake Counties fuel, has a highly variable fire return interval ranging from 10 to over 100 years. If properly managed an individual could easily keep fire from returning to the landscape for a long period of time. Another advantage of insuring homeowners in recent burn areas, is the opportunity to educate them with advice on how to manage the vegetation around their home as it begins to regrow. This would in turn, promote defensible space around the structure, and give the client a piece of mind that their insurance company cares for their home, while simultaneously protecting the insurers investment.

Sources

http://www.lakecountyca.gov/Assets/County+Site/Fire+Safe+Council/cwpp/eco.pdf

http://www.lakecountyca.gov/Government/Boards/lcfsc/LCCWPP.htm

http://www.latimes.com/local/lanow/la-me-lake-county-fire-epicenter-20180814-story.html

http://www.californiachaparral.com/fire/firenature.html

https://www.weatheronline.co.uk/reports/wxfacts/The-Foehn-foehn-wind.htm

https://www.nfpa.org/-/media/Files/Training/certification/CWMS/S-190-Intro-to-Wildland-Fire-Behavior.ashx?la=en

Wildfire near home in Possum Kingdom, TX

Will wildfire risk impact my home insurance?

Over the last thirty years, the length of wildfire season has increased by nearly 20% around the world. In California, the idea of wildfire ‘season’ is nearly laughable as large growth, damaging wildfires happen year-round on a regular basis now. While wildfires can happen just about anywhere, the western US States are usually at greater risk for experiencing wildfires. Higher rates result from this increased risk and, in some areas, the insurance companies may not offer coverage at all.

Why is wildfire coverage important?

Home built in the WUI

Many communities are building farther into the wilderness (Credit: Google Earth)

As approximately one-third of homes in the United States are in the Wildland Urban Interface (WUI), insurance companies are updating what is and is not covered in cases of wildfire. Insurance companies may factor in wildfire history in the area, home construction materials, vegetation, and topography, for example. In a few of the highest risk areas in the country, some insurance companies have opted to avoid writing policy coverage at all!

When structuring your policy, be sure to ask questions to know what is covered and how you are protected in case of wildfire. Policies may cover additional living expenses (ALE, in case damages or loss make your home uninhabitable), fire department service charges, or repairs and debris removal after a covered loss. There may be an additional option for fire insurance specifically for your non-primary residence. Different carriers offer different protections and add-ons, so be sure to know what you need.

What property features are considered?

Construction materials, surrounding vegetation, and landscape features are a few considerations when determining wildfire risk. (Credit: Oregon State University)

Construction materials, surrounding vegetation, and landscape features are a few considerations when determining wildfire risk. (Credit: Oregon State University)

Vegetation, alone, on your property isn’t necessarily a cause for concern. Insurers will typically take into account the location and type, as well as density, of the surrounding vegetation. Fire stations and hydrants near your home alleviate some levels of risk as there are preventative resources near the home should a wildfire emergency occur. Topographical features could play heavily on your potential extra costs. If you live in or near notable high risk areas, such as a canyon or the deep woods, additional insurance charges may be added to cover the increased risk to your home from wildfire. Roof type, along with eaves and siding materials, may also play a factor. For example, a wood roof (even if treated) is at much higher risk of catching fire from embers than a clay tile roof.

Homeowners can ensure they maintain significant defensible space that can help slow or stop a wildfire from spreading to your home and property.

Can I do anything to help protect myself?

Do not be discouraged! There are steps you can take to help make your home more fire-resistant. Programs like the Wildfire Partners Program out of Boulder County, Colorado, give homeowners a property assessment with specific tips, updates, landscaping, and removals that decrease their risk to a wildfire. Additionally, some insurance companies have specialists that perform consultations and provide the homeowner a report with recommended improvements to eaves, patios and decks, roofs, and vegetation. In areas with high wildfire risk, insurance companies may require this kind of consultation and follow up work in order to authorize writing the policy. As always, be your own advocate, and take the first steps to giving your home the best chance of survival from a wildfire. However, if you choose to live in a high wildfire risk area, be prepared to pay a bit higher premium to have proper insurance coverage in case of a destructive wildfire.

Source(s):

https://disastersafety.org/wildfire/preventing-fire-damage-other-roofing-tips/

http://www.readyforwildfire.org/Defensible-Space/

http://www.wildfirepartners.org/our-program/

 

Social Media Tips for Insurance Agencies During Wildfire Season

If your company isn’t harnessing the power and audience of social media outlets in your disaster plans, you are leaving a huge resource untapped. Today we will be exploring some ways that social media can help insurance agencies stay informed, provide resources and information to customers, improve customer service, and spread the knowledge and professionalism of their brand. For more information on how Social Media is used to deliver timely wildfire information, see our past blog: Social Media and Wildfire.

Passive vs. Active Uses

Passive: monitor and follow various feeds of information to remain up to date.

  • Follow reliable Fire and Safety Agencies for the latest information regarding an incident. Federal, State, and Local fire agencies are getting more active on Twitter, Facebook, Periscope, and other social networks. Official accounts often offer the latest official information much faster than news reports.

    Tahoe National Forest tweets a link to details regarding an upcoming prescribed burn.

     

  • Watch livestreams of briefings or news reports from the scene. New livestreaming technology and adoption are bringing unprecedented access to official briefings and meetings in real time. Example: Canyon Fire Briefing from September 28, 2017.

Active: share information to help your followers stay informed.

  • Inform followers of fire and insurance resources. Retweet information about shelters for those displaced by the fire, or make a Facebook post about how to file a claim for damaged property. Being helpful and forthcoming about what the company knows and can offer will build good faith with your customers, especially in a time of need.

    FEMA tweeting resources to help with applying for disaster aid.

  • Share fire information that affects your customers, such as the latest fire activity, evacuations, road closures, etc.

CalFire tweeting the final acreage and containment figures to the Nuns Fire with a link to the incident page.

 

  • Use official media from ready.gov and weather.gov to advise followers of how to prepare their homes and family plan before a wildfire, and what to do when one occurs. These links provide excellent content intended to be shared on social media.

    National Weather Association tweets a link to their wildfire safety preparedness web page.

 

  • Respond directly to customer questions and concerns with credible information.

The official Sonoma County Sheriff twitter updates followers on the latest evacuations.

Bottom Line: Information is Valuable and People Will Appreciate the Help

Wildfires can be confusing, frustrating, emotional, and devastating for individuals and their families. Social media offers insurance agencies multiple tools to help keep themselves and their customers informed. Important information such as evacuations, shelters, and resources is not always easy for people to find. Being proactive about knowing what is going on and sharing that information adds trust with your customers and can help make a devastating event in their life a little easier to handle.