Understanding how the past and present inform the comprehensive evaluation of wildfire hazard scores
As summer ends, the many fires that raged across the U.S. this year are a stark reminder to continue to focus on proper risk management strategies.
In California, 16 of the state’s 20 most destructive wildfires occurred in the last seven years. This includes fires such as the Camp Fire, the Tubbs Fire, and the North Complex Fire. Moreover, in Colorado, 11 of the 20 most destructive wildfires also occurred in the last seven years.
As wildfires are becoming more consequential for property owners, insurers, and other stakeholders, it is important to have the right solutions incorporated into your workflow to effectively address this complex peril.
Historical Data Challenges: A Lesson From California’s Wildfires
Understand How Mitigation Impacts Risk
Wildfire Mitigation Score
In the realm of wildfire risk assessment and models, there is debate about the use of historical data versus simulation-based approaches. Traditionally, proponents of historical data have touted its reliability and accuracy as a basis for assessing risks. However, the limitation of historical data lies in its inability to capture the full scope of potential future events, especially in the case of perils like wildfire.
While historical data remains a critical piece of the puzzle, simulation models offer a forward-looking vantage point that enhances our understanding of risk. These models can identify potential high-risk areas that historical data might miss. A historical bias would skew risk toward previously burned areas, and its static nature does not account for how the risk has changed since those past events.
Moreover, the historic record alone does not capture the full range of potential wildfire events that could occur today, let alone those that might happen in the future. Realistic and effective models should be trained on a variety of datasets — past and present — and pass all historical and current validation tests.
Most importantly, a model should not use the same dataset for development and validation. Using the same dataset for both steps could bias the validation process and fail to provide a realistic review of the long-term efficacy of the model’s output.
Consider this scenario: if looking only at only historical data until 2017, risk models would show some areas of wildfire-prone California as virtually risk-free. Take the California towns of Santa Rosa and Paradise as examples. Until 2017, these places had never witnessed a single recorded fire. However, the 2017 Tubbs Fire in Santa Rosa and the 2018 Camp Fire in Paradise destroyed 5,643 and 18,804 structures, respectively. Relying solely on historical data can lead to overlooking areas in California with the potential for wildfire.
Wildfire Risk Maps, Models, and Scores: Enhancing Enterprise Risk Management
This is why CoreLogic’s comprehensive set of tools include a simulation-based approach, incorporating the latest scientific understanding of wildfire into their modeling. Using this toolkit allows for an estimation of risk that accounts for current conditions, rather than only historical conditions.
The CoreLogic Wildfire Risk Score™ (WFRS™) is a crucial tool that enables underwriters to easily distinguish areas of exceedingly high- and low-wildfire risk. It accounts for both the wildfire hazard at any given location within the geographic extent of the model as well as the location’s proximity to ember-generating, high-risk areas; information pertaining to wildland locations; and recent wildfire events. The risk score incorporates factors influencing wildfire hazard, such as slope, aspect, fuel, surface composition, drought and wind, at a 30-meter resolution across 16 modeled states.
The CoreLogic U.S. Wildfire Model can provide insurers and reinsurers with insights into wildfire risk scores by address at the single property level or at the portfolio level.
As a comprehensive probabilistic model, CoreLogic’s model simulates wildfire activity based on the hazard today to fully calculate the likelihood of a wildfire starting, spreading, and damaging property. The CoreLogic U.S. Wildfire Model leverages the same property and hazard data incorporated in the Wildfire Risk Score, but it expands the analysis a step further. The Wildfire Risk Score quantifies the hazard at any given location within the model, while the Wildfire Model can estimate the loss and the likelihood of that loss occurring by simulating hundreds of thousands of annual wildfire scenarios.
The CoreLogic Wildfire Mitigation Score™ (WFMS™) is a California-specific deterministic model created for insurers, lenders, and other service providers impacted by the regulatory requirements created by the California Department of Insurance (Section 2644.9). WFMS provides a qualitative and quantitative look into risk by identifying the presence of community, property, and building-hardening mitigation measures and accordingly reducing the risk score if there are applicable mitigating actions.
Additionally, in recent years the California Department of Insurance (CDI) enacted several regulatory measures to address homeowners’ and business owners’ insurance-related concerns regarding wildfires. In order to fully support its clients, CoreLogic aligned its suite of wildfire offerings to meet all CDI regulatory requirements.
Wildfire Risk Management Starts by Properly Using a Full Toolbox
The Wildfire Risk Score, Wildfire Mitigation Score, and the U.S. Wildfire Model each serve a specific purpose with respect to this complex peril. Using these tools together can facilitate the assessment of higher-risk properties with easy screening and risk selection. Additionally, these models can quantify the impacts of structural vulnerability and completed mitigations to the overall portfolio.
As the landscape of wildfire risk continues to evolve with changing climate conditions and urban expansion, wildfire has become an increasingly complex peril that requires a proactive approach. It is more important than ever for insurers to have the right tools integrated into their workflows to support the creation of more resilient and adaptive communities. As you continue to manage your risk and business goals, we invite you to explore CoreLogic’s comprehensive wildfire solutions.
Understand How Mitigation Impacts Risk
Wildfire Mitigation Score
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