Natural catastrophes in focus: Wildfires

In many places across the globe, wildfires are becoming more frequent, larger and more severe, posing a growing threat to communities and ecosystems. Some of the most expensive years for wildfires in terms of economic and insured losses have occurred during the past decade.

Wildfires, also known as bushfires in some countries, are a natural phenomenon of the forest ecosystem, essential for restoring nutrients to the soil, clearing out decay and helping plants to reproduce. The two primary causes of wildfires are man-made (fallen utility lines, careless campfires, fireworks, arson, etc.) and natural (lightning strikes). Globally, it is estimated that only about 5% of wildfires start naturally. In the US, about 85% of fires are started by humans, while in Canada, more than half of all fires are started by lightning.

Droughts and heatwaves, which have been linked to climate change, contribute to the drying of vegetation, creating potential fuel for wildfires. This dry vegetation, especially when combined with strong winds, creates ideal conditions for wildfires to ignite and spread rapidly resulting in something called "fire weather". At the same time, increased building in the wildfire-urban interface (WUI) can result in more man-made fire ignitions, escalating property values at risk.

In addition to property damage or loss, wildfires can lead to injury and death, health impacts from air pollution, business interruption, loss of harvestable lumber and land for agriculture.

The best risk management is to implement proper mitigation and adaptation measures to address the current reality of increasing wildfire activity. Communities can restrict development in the WUI to reduce loss of life and property when wildfires occur. Local governments and property owners can also reduce financial risk through proper maintenance of underbrush to reduce burnable vegetation, building with flame retardant materials and maintaining safe perimeters around buildings. Detailed and easily implemented evacuation plans are also critical to avoid injury and loss of life for those living in wildfire-prone areas.

As downed power lines are a significant source of wildfire ignition, utilities operating in hazard locations must manage the changing risk landscape to minimise wildfire occurrence. For utilities operating in wildfire hazard locations, managing the changing risk landscape will be key to minimising wildfire occurrence. Beyond upgrading electricity poles, this means following the latest industry best practices in maintaining power lines and the vegetation around them, to prevent fires in the first place.

Finally, reducing CO2 emissions remains an essential component in addressing the climate driver behind the wildfire hazard.

Due to property concentration and high property values in wildfire-exposed areas, the US experienced 7 of the 10 most expensive economic-loss wildfires, as well as 8 of the 10 most insured-loss wildfires, since 1970. A very large percentage (up to three quarters) of losses from wildfires are insured due to it being an insured peril in most homeowner’s and business policies.

Some of the most expensive years for economic and insured losses from wildfires have occurred since 2016, with wildfires for the 2013-2022 period costing USD 98.87bn in economic losses globally and USD 69.92bn in insured losses (adjusted to USD 2023). Increasing wildfire losses for insurers have caused some to curtail writing property coverage in heavily impacted areas.