As Los Angeles continues its battle against wildfires, the financial fallout of these catastrophic events is becoming alarmingly clear.
CoreLogic recently estimated that insured losses from the Palisades and Eaton fires could soar between $35 billion and $45 billion.
Meanwhile, Moody’s RMS has projected that losses might range from $20 billion to $30 billion, underscoring the potential for this wildfire season to become the costliest in U.S. history.
Verisk chimed in, offering its own estimates, which hover between $28 billion and $35 billion for combined losses.
Insights from Faura
Amid this turmoil, Insurance Journal sought insights from leaders at three innovative insurtech firms focusing on wildfire insurance, eager to understand the broader implications of such disasters and the trajectory of insurance in fire-prone areas.
This segment features key thoughts from Faura, a prominent insurtech player, highlighted in a conversation with CEO Valkyrie Holmes.
Holmes pointed out that comprehending the structural integrity of buildings in high wildfire risk zones is crucial.
Faura sets itself apart by supplying insurers with in-depth analyses regarding property survivability during disasters.
Instead of relying strictly on standard climate models, they tap into independent data concerning building structures to evaluate the likelihood of properties enduring wildfires.
Their assessments take into account various elements, such as the materials used in construction and specific design features—like ember-resistant vents—comparing this information against historical fire incident data.
A Win-Win Scenario
With an eye on promoting a win-win scenario for insurers and policyholders alike, Faura aims to boost profitability for both parties involved.
Notably, many of Faura’s clients are situated in areas currently grappling with the Southern California wildfires.
On January 9, Holmes shared some initial observations derived from Faura’s research, revealing that properties exhibiting improved resilience—particularly concerning wind direction—tended to correlate with higher profitability.
This observation hints at the emergence of previously overlooked opportunities in these stricken regions, signaling a shift in what insurers can consider viable.
Holmes anticipates that clearer loss figures will emerge in the coming weeks.
Rethinking Disaster Risk Evaluation
Reflecting on the devastation wrought by the wildfires, Holmes conveyed her deep distress, describing the situation as heart-wrenching.
She called upon her fellow insurance professionals to rigorously reassess their approaches to disaster risk evaluation, emphasizing the importance of ensuring that their portfolios are prepared for calamities of this scale.
Areas characterized by dense vegetation, low rainfall, and high wind potential particularly need thorough risk assessments, she asserted.
Holmes also highlighted the importance of holistic consideration of various risk factors.
She questioned the capacity of physical assets within structures to withstand such devastating events.
While she acknowledged the significant role climate risk models play in the insurance sector, Holmes argued it’s time for a mindset shift.
The next critical step, she suggested, involves a proactive strategy aimed at ensuring that assets remain intact post-disaster.
This approach signifies a transformation in how the industry assesses risk, shifting focus toward prevention and resilience.
Source: Insurancejournal
