Category
Natural Hazards, Risk Analysis
About This Project

Modeling Wildfire Risk Accumulation

Visualization of a wildfire burn probability used to develop a geostatistical model of wildfire risk for the US
PROJECT TYPE(S)
Natural Hazards
Risk Analysis
Client

RedZone

In collaboration with a partner company, Redzone, we have developed new methods to help insurers manage portfolio-level exposure to extreme fire events by understanding regions of correlated wildfire risk. Applying this analysis to their portfolio, insurers better understand and manage risk while informing decisions about future policies.

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Wildfires can cause hundreds of millions of dollars in damage within limited geographic areas, exposing insurance companies to large losses during bad wildfire years. To insure a large portfolio of properties while limiting exposure to extreme losses, insurers need to diversify liability by limiting accumulation of highly-correlated risks. As part of RedZone Analytics, we developed a geostatistical model of correlated wildfire risk zones across the United States based on the perimeters produced by the Large Fire Simulator (FSIM) from the USDA Forest Service and our proprietary assessment of wildland-urban-interface risk.1,2 Our accumulation model can be used to assess probable maximum losses over a range of zone sizes, supporting both underwriting and portfolio-level analysis, allowing insurers to identify regions where they can increase liability with only minimal increase in overall exposure to extreme losses, and where decreasing liability will substantially decrease exposure to extreme losses.

1.Short, Karen C; Finney, Mark A; Scott, Joe H; Gilbertson-Day, Julie W; Grenfell, Isaac C. (2016). “Spatial dataset of probabilistic wildfire risk components for the conterminous United States.” Fort Collins, CO: Forest Service Research Data Archive. https://doi.org/10.2737/RDS-2016-0034.
2.Finney, Mark A; McHugh, Charles W; Grenfell, Isaac C; Riley, Karin L; and Short, Karen C. (2011). “A simulation of probabilistic wildfire risk components for the continental United States” USDA Forest Service / UNL Faculty Publications. 249. http://digitalcommons.unl.edu/usdafsfacpub/249
PROJECT TYPE(S)
Natural Hazards
Risk Analysis