Despite being a hazard that is tough to evaluate, Swiss Re’s Gianfranco Lot recommends that wildfire threat is “clearly insurable” as he expects it will still form part of the company’s nat cat portfolio moving forward.
He continued, “We work together with a satellite imagery company that allows us to track wildfires much more closely, and we’ve invested quite a bit in technology and data to allow us to underwrite that risk better.”
Having said that, Lot recommends it’s still a hazard that is “difficult to assess”, though it’s “clearly insurable” and will form part of Swiss Re’s nat cat portfolio moving forward, simply less than previously.
Lot went on to state, “We have what we call pattern threats in our portfolio. Those are secondary hazards that are not cyclones or earthquakes, hazards that are harder to design and tough to anticipate.
“From our viewpoint, we’ve done 2 things. One, we’ve taken a look at the accessory points, we took a look at the structures of the reinsurance agreements and attempted to connect at a greater point today, which implies that the pattern threat and the frequency threat were moved far from that pattern and frequency threat.
“The result of it is that not from an appetite point of view, but just by moving away from these frequency scenarios, we have less of that wildfire risk in our portfolio as before.”
Swiss Re is not the only reinsurer moving far from frequency threats and aiming to connect greater up, as this has actually been a continuous pattern throughout the sector in the middle of raised losses from these kinds of occasions.
Earlier this month, Gallagher Re launched a report keeping in mind that the disastrous wildfires that have actually afflicted California in recent years have actually ended up being a centerpiece for insurance companies and reinsurers, requiring them to reassess their techniques to underwriting and prices.
According to the report, the 2022 United States wildfire season experienced the burning of 7.5 million acres, with Alaska accounting for 3.1 million acres alone.
An overall of 68,988 wildfires were reported in 2022, leading to the damage of 2,717 structures and triggering an approximated financial loss of $3.0 billion and an insured loss of $500 million.
While the variety of acres burned in the 2022 wildfire season followed the long-lasting average, issues about possibly destructive wildfires stay at an all-time high, the report said.
