AIR Worldwide Publishes Wildfire Models

Boston – A new probabilistic model designed to help insurers better understand the location of their exposures relative to high risk areas and to estimate potential losses from wildfires is now available from AIR Worldwide Corp., a Boston risk modeling company. The U.S. Wildfire Model is designed to help insurers, reinsurers, and intermediaries manage wildfire risk both for individual policies and entire portfolios of properties in California. Nationally, wildfires have cost the insurance industry more than $5 billion since 1980 with a majority of the losses occurring in California. The 2003 Cedar and Old wildfires in Southern California, for example, cost insurers more than $2 billion. Together, the fires burned more than 750,000 acres, destroyed 3,700 homes and resulted in the deaths of 24 people. In 2006, more than 8.7 million acres have burned in Western states to date, equaling the acreage burned in all of 2005, one of the worst years on record. “The growth in insured losses from wildfires is a result of the same broad demographic trend we’ve observed with respect to other perils—namely, increasing property development in high risk areas,” said Dr. Jayanta Guin, vice president of research and modeling at AIR. “In the case of wildfires, we are witnessing property growth in the buffer zone between wildlands and the urban environment. According to U.S. Fire Administration statistics, nearly 40 percent of new home development in the Western United States is occurring in this wildland-urban interface, putting more insured property at risk every year.” Insured losses from wildfires are influenced by factors such as local fuels, topography, weather, and the vulnerability of affected structures. AIR’s model employs high-resolution fuel (vegetation), topographic, and weather data. The model incorporates 13 burnable fuel types at 30-meter resolution accounting for variations in moisture content, fuel loading, and horizontal continuity. Since fire spread is influenced by topography, AIR has incorporated high-resolution USGS digital elevation data. The model also considers the effect of wind speed and direction, including the Santa Ana winds in Southern California and the Diablo winds in the northern part of the state. The AIR model also estimates the mitigating impact of firebreaks created in the course of fire suppression activities, as well as the exacerbating impact of impaired road access. The flammability of roof and siding materials is the primary determinant of a structures’ vulnerability to fire. The AIR model accounts for a wide range of residential and commercial constructions and takes into account mitigating factors, such as fire resistant roofing and siding materials, to build an estimate of damage and loss. AIR’s probabilistic wildfire model is based on a robust stochastic catalog of potential future events that provides insurers with full probability distributions of loss and the ability to generate loss costs. The model is available now for AIR’s CLASIC/2, CATStation, and CATRADER catastrophe risk management systems to analyze exposures in California. Future releases of the model will expand its coverage to other Western states. Source: AIR Worldwide Corp.