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Expanding development exposes more property owners to wildfire risk


Wildfire is a growing risk for property owners in many states as development pushes into rural areas and as climate change worsens the hot, dry conditions that lead to major conflagrations.

While insured losses from wildfire are still dwarfed by losses from other types of catastrophes, such as hurricanes, they have grown costlier in recent years and are occurring in states where they haven't historically been a problem, such as Colorado, according to the Property Claims Services Division of Verisk Analytics in Jersey City, New Jersey.

Businesses are increasingly following residential development into outlying areas of the “urban/rural interface,” increasing commercial exposure.

And tinderbox conditions may only get worse: Drought and rising temperatures caused by climate change — and tree deaths caused by resulting insect infestations — are likely to lead to vastly larger burned areas in the western U.S. in coming years, according to the National Climate Assessment released by the White House in May.

“I think the risk is higher than it's ever been, and I think that will continue,” said Craig Garlock, a senior consultant with Aon Global Risk Consulting in Los Angeles.

Businesses can take steps in building and maintaining properties to minimize fire damage and should have contingency plans in place to minimize business interruption losses, risk management experts say.

While several of the largest recorded wildfires have occurred in Alaska — including a series of fires in 2004 that burned 1.3 million acres — most of the costliest fires have been in California. Of 23 wildfires labeled catastrophes by PCS since 1950, 16 were in California and produced about $6 billion of a total $8 billion in losses, said Joseph Louwagie, a PCS assistant vice president. Colorado has had three catastrophic wildfires, all since 2004, while Arizona, Florida, New Mexico and Texas have each recorded one since 1950, he said.

Apart from the 1991 Oakland Hills fire in California — which burned 2,900 structures and killed 25 people — the three most damaging California wildfires have occurred since 2003. Those fires, in San Diego and San Bernardino counties, burned over 562,000 acres, destroyed 5,473 structures and caused 23 deaths, according to the state Department of Forestry and Fire Protection.

The three California fires and the three in Colorado since 2004 produced $4.38 billion in insured losses, most of them residential, according to PCS.

California has suffered disastrous wildfires for decades, but the threat has increased there and elsewhere as growing populations have pushed development up wooded hillsides and out into riskier rural areas, experts say.

In Los Angeles, the trend accelerated in the 1940s as people moved out of the flat LA basin into the surrounding hills and beyond, Mr. Garlock said.

“We love nature, so we are living in the path of wildfires,” said Leslie Chapman-Henderson, president and CEO of the Federal Alliance for Safe Homes Inc., a disaster safety group in Tallahassee, Florida.

Businesses have followed. Typically, these have included hotels and resorts, restaurants and golf courses, said Paul Hering, CEO of Barney & Barney, a unit of Marsh & McLennan Agency L.L.C. in San Diego.

FM Global, though, has an increasing number of industrial policyholders in areas that are exposed to wildfire risk, said Ronnie Gibson, vice president and chief engineer with the Johnston, Rhode Island-based insurer.

“It's only relatively recently that we've been putting our plants and factories in those areas,” Mr. Gibson said. While European manufacturers have long placed high-value plants in fire-prone rural areas, the size and dollar value of facilities in the U.S. is smaller “because we are only beginning to build plants in harm's way,” he said.

Property owners in wildfire-exposed areas are generally aware of the risk, experts say, and are — or should be — taking steps to mitigate fire damage and to limit business interruption costs (see related story).

A company planning to build, for example, would be better off avoiding hilly sites: A fire on a 30-degree upward slope can produce flames twice as high and travel several times faster than a fire on flat ground, according to FM Global.

Because drifting embers can travel up to a mile from a wildfire, building roofs should be made of nonflammable material and designed to avoid changes in profile that create corners where inflammable debris can collect, experts say.

Likewise, building designs should avoid skylights, vents and louvers where sparks could enter. In existing buildings with these features, openings should be covered with mesh, experts advise.

Shrubs and trees that could become torches in a fire should be kept well away from buildings. Vegetation should be cleared 100 feet around important structures on level sites and 200 feet downslope on hillsides, FM Global recommends.

Perhaps the most important step is to protect a property's water supply, Mr. Gibson said. Water tanks should be metal, and pumps should be diesel-powered; if a fire knocks out power to a site and shuts down electrically powered water pumps, “all that money is wasted,” he said.

Property owners need to act together on mitigation steps, added Steve Quarles, senior scientist with the Insurance Institute for Business & Home Safety in Tampa, Florida. If some owners don't take the necessary steps, their buildings could become ignition sources for neighboring structures in a wildfire.

“We all need to be on the same page,” he said.

This month's federal National Climate Assessment suggests wildfire risk isn't going away. Burned area in Colorado's southern Rockies is likely to increase two to five times by 2070 depending on ongoing levels of greenhouse gas emissions, a study cited in the report predicts. And burned area in northern California could double by the end of the century under a high emissions scenario, the assessment said.

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