Property Risks

Billions at Stake From Wildfire Risk

California, Colorado and Texas are at highest risk for wildfire damage.
By: | March 18, 2015 • 4 min read
Topics: Climate Change

Close to a million homes in the West are at a high or very-high risk for wildfire damage, and would collectively cost more than $237 billion to rebuild, according to a report on wildfire hazard risks by CoreLogic.

The Irvine, Calif., property information and analytics provider now ranks risks based on reconstruction costs instead of assessed value after acquiring a company that calculates property analytics, said Thomas Jeffery, CoreLogic’s senior hazard scientist who based in Madison, Wis.

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“We’re now able to dig down and tabulate what it would costs to rebuild, which in some cases, are is higher than the assessed property values,” Jeffery said. “This allows us to generate a more real-world perspective of the wildfire risk for homes in a particular area.”

California, Colorado and Texas have the largest number of residential properties categorized as “very high risk,” with a combined reconstruction value exceeding $36 billion, according to the report. Including homes located in the “high risk” category, the reconstruction value is more than $188 billion for these three states.

“We’ve had two consecutive years of drought conditions and everyone has been expecting tremendous damage from wildfires, but so far the fires have only been sporadic.” — Thomas Jeffery, senior hazard scientist, CoreLogic

At the CBSA (Core Based Statistical Area) level, Denver-Aurora-Lakewood, Colo. ranks first for the most number of homes at “very high” risk out of the 258 CBSAs analyzed. Riverside-San Bernardino-Ontario, Calif., comes in a close second, followed by Sacramento-Roseville-Arden-Arcade, Calif.

When ranking CBSAs based on Wildfire Risk Score (which takes into account the level of susceptibility to wildfire, as well as the risk associated with the property being located in close proximity to another high-risk property or area), Riverside-San-Bernardino-Ontario, Calif. takes the top spot for the most number of homes that fall under the highest risk segment, followed by Sacramento-Roseville-Arden-Arcade, Calif. and Austin-Round Rock, Texas.

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While property insurers may not stop writing policies in certain areas, they may even out their books of business so they’re not so concentrated in areas that potentially could be devastated by an event, Jeffery said.

“We’ve had two consecutive years of drought conditions and everyone has been expecting tremendous damage from wildfires, but so far the fires have only been sporadic,” he said. “But people should not get complacent on their homeowner mitigation, which is on the frontline of defense, right after the first responders. Everybody should take the danger of wildfire seriously, especially due to these drought conditions.”

Jeff Reinig, head of underwriting, personal lines at Farmers Insurance Group in Woodland Hills, Calif., said via email that the carrier’s underwriting and rating is based for the most part on actual claims data, but reports similar to CoreLogic’s data “supplement an already robust set of inputs into our methodology.”

Risk Management Practices

Several brokers detailed the types of risk management best practices they advise for clients who own properties in high-risk areas.

Owners of commercial properties should have Class A fire-rated roofs, which should be kept clean of debris, said Frank Oliver, senior vice president at Aon Global Risks Consulting in New York City.

“The majority of wildfires are due to embers flying through the air, rather than actual flames, and that’s why a Class A fire-rated roof is probably the best practice,” Oliver said.

Businesses should also create a fire break within the attic or dead air space, he said. Building codes now require fire breaks within those spaces, but not for older properties, so as a practice, businesses should create some type of fire stop so it’s not just one contiguous space.

If there is a fire, businesses should make sure employees close the windows, so that embers don’t come through and ignite combustible materials that are within the building.

Property owners should also create defensible zones 5 feet to 30 feet around their buildings, Oliver said.

If there is vegetation close to the building, make sure to plant “wet” vegetation that is resistant to fire, as well as stone or rock mulch instead of wood mulch. If a property is on a slope, fire can run much faster up a slope than alongside the ground, so businesses need to create a larger defensible space around the property.

Barney & Barney Insurance Services LLC in San Diego advises commercial clients in disaster-prone areas to develop emergency recovery plans, and will provide outlines if necessary, said Peter Holmes, client executive at the firm, a division of Marsh & McLennan Agency LLC.

“They need to ask themselves such questions as, ‘Where is their business intelligence?’ ‘Their lists of clients, receivables, deliverables?’ ” Holmes said. “These should all be located offsite, on a cloud.”

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Businesses should also have an emergency communications plan for their employees, such as a pocket card listing the number of a central location to call. They also need a plan on how they are going to communicate with clients to let them know they are operating in a temporary location.

Suppliers also need to make sure that if their factory burns down they have relationships with other suppliers that can either let them manufacture their own products on their site or supply similar products on their behalf.

“Emergency plans are not just for wildfires but any emergency, such as an earthquake or a power outage that could damage production facilities such as pharmaceutical laboratories whose experiments needs to be conducted at certain temperatures,” Holmes said.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]