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Ecological forestry can cut wildfire risk, reduce premiums: Report

Posted On: Jul. 7, 2021 12:27 PM CST


Ecological forestry, including prescribed burns and the removal of smaller trees and other vegetation in overgrown forests, can reduce property insurance costs while lowering the likelihood of extreme wildfires, according to a report released Wednesday by Willis Towers Watson PLC and The Nature Conservancy.

The report, Wildfire Resilience Insurance: Quantifying the Risk Reduction of Ecological Forestry with Insurance, said ecological forest management can lead to decreases in total insurance premiums by 41% for homes.

Researchers at The Nature Conservancy and Willis Towers Watson quantified insurance premium savings by modeling the impact on insurance of controlled burning and ecological thinning of overgrown forests.

The report showed that parametric insurance applied to the intensity and acreage of wildfires resulted in a reduction in both losses and premiums and “is an innovative way for insurers to cover fire risk.”

Wildfire-related insured global losses totaled $15 billion in 2017 and $18 billion in 2018, the report said. Northern California saw record losses in excess of $10 billion in 2017 and 2018 — “a strong indication that we have reached a new hazard level there as well,” the report said.

Previously, the only event in Northern California to exceed the billion‐dollar insured loss threshold was the Tunnel Fire of 1991, with insured losses of $1.7 billion

“The state-of-the-art analytics described in this report provide insurers with tools to incorporate the true value of wildfire risk reduction through ecological forestry into underwriting decision-making,” Nidia Martínez, director of climate risk analytics at Willis Towers Watson, said in a statement released with the report.