Despite Decrease in Frequency, Wildfires Continue to Pose a Threat - Triple-I

The Insurance Information Institute (Triple-I) has reported that despite a decrease in fire frequency, potential insured losses from wildfires are on the rise. This increase is attributed to the fact that nearly 99 million Americans live in the wildland-urban interface (WUI), a transitional zone where human activity and structures mix with wildland. According to Triple-I's chief insurance officer Dale Porfilio, the level of development in the WUI directly impacts insured losses, and stakeholders must understand and respond to the risks associated with properties in this proximity.

A 2022 report from the US Fire Administration revealed that over 46 million homes, valued at $1.3 trillion, are situated within the WUI. The Swiss Re Institute also highlighted a doubling of natural catastrophe insured losses from wildfires over the past three decades, indicating a long-term trend.

Triple-I stressed the importance of thorough data collection and analysis in underwriting and pricing coverage due to the correlation between wildfire risk and geography. Porfilio mentioned that even in states with high wildfire risk, there are profitable insurance opportunities that require sophisticated modeling tools for accurate underwriting. Despite the deadly August wildfires in Hawaii, the US is currently experiencing the lowest number of wildfires since 2014, as noted by Triple-I.

State and local authorities, as well as the federal government through the Infrastructure Investment and Jobs Act of 2021, have invested significantly in addressing the causes of wildfires and improving response efforts. The private sector, including initiatives like the Wildfire Prepared Home designation by the Insurance Institute of Business & Home Safety, has also contributed to reducing wildfire risk.