Aon Cites Need for Mitigation as Insured Wildfire Losses Top $10B for Second Year

December 7, 2018

Total aggregated economic losses for the wildfires that have burned across Northern and Southern California throughout the month are expected to minimally exceed $10 billion, while insurance claims payouts for wildfires are set to exceed $10 billion in the United States for the second year running.

Insurance broker Aon’s Impact Forecasting team issued its global catastrophe report that evaluates the impact of natural disaster events that occurred worldwide during November 2018.

The most catastrophic of the recent California wildfires, the Camp Fire in Butte County, largely destroyed the city of Paradise, killing 88 people with dozens of others unaccounted for. The California Department of Forestry and Fire Protection, CalFire, has reported that 19,357 homes and other structures were damaged or destroyed, making the Camp Fire the deadliest and most destructive on record in California. Additionally, three people were killed in the Woolsey Fire as the fire damaged or destroyed nearly 2,000 structures in Ventura and Los Angeles counties.

The U.S. events may cause insurers to rethink wildfire risk.

“With annual wildfire industry payouts expected to exceed $10 billion for the second consecutive year in the United States, the standard assumption of wildfire being a secondary peril may evolve in the future,” said Steve Bowen, Impact Forecasting director and meteorologist. “While insurers remain firmly in position to handle the volume of claims in the aftermath of recent events, these heightened losses put a further spotlight on the growing risk of the peril around the world. The growth of exposure into known fire locations and the prospect of more weather and climate-driven effects will require continued focus on mitigation initiatives.”

In separate reporting, catastrophe modeling firm AIR Worldwide estimates that industry insured losses from the Camp Fire in Northern California will be between $6 billion and $9 billion, and taken together with the Woolsey fire in Southern California AIR estimates industry insured losses at between $9 billion and $13 billion.

Modeler RMS said in mid-November that losses from the California wildfires could be between $9 billion and $13 billion.

Wildfires caused $14 billion of insurance losses in 2017 – the highest on record for the peril at that time, according to Aon.

Meanwhile, Cyclone Gaja made landfall in southern India, causing widespread impacts across the states of Tamil Nadu and Kerala. The cyclone killed 46 people as damage was incurred to more than 117,500 homes. The overall economic impact was listed in excess of INR54 billion (USD775 million).

Two other notable tropical cyclones made landfalls in November, both in Vietnam. Tropical Depression Toraji killed 19 people as damage reached at least VND396 billion (USD17.2 million). A weakened Typhoon Usagi brought record rainfall to the greater Ho Chi Minh metro area. Minimum economic damage was listed at VND347 billion (USD15 million).

Around the Globe

Further natural hazard events to have occurred worldwide during November include:

  • A major magnitude-7.0 earthquake struck just north of Anchorage, Alaska on November 30, causing widespread damage to residential and commercial property in addition to local transportation and utility infrastructure. Total economic losses were expected to exceed USD100 million.
  • Parts of Italy and Spain dealt with complex storm systems and flooding during the end of October into November. In Italy alone, dozens of fatalities were recorded as the inclement weather killed dozens of people. Economic damage was expected to be more than EUR3.0 billion (USD3.4 billion). In Spain, one person was killed as flooding caused severe damage to infrastructure and agriculture. Crop damage in the Valencian region alone will range from EUR70-120 million (USD80-140 million).
  • Strong thunderstorms impacted central areas of Chile with large hail and intense rainfall, causing notable agricultural damage. Agricultural industry authorities estimated that economic losses were likely to approach USD200 million. Among the worst affected areas were the O’Higgins and Maule regions.
  • Severe weather events also occurred in the United States and Australia.
  • Heavy rainfall swept across parts of the Middle East, prompting flash flooding and dozens of casualties. Damage in Kuwait alone was listed at KWD100 million (USD330 million).
  • Winter storm events caused notable damage and disruption in the United States and China.

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