"The devastating wildfires in California earlier this year offer essential lessons for insurers in European countries. With increasing wildfire threats and potential economic losses exceeding EUR 2.5 billion yearly, it's imperative for the insurance industry to enhance its understanding of the risk and preparedness", said Nikhil da Victoria Lobo, Head P&C Reinsurance Western & Southern Europe and Middle East & Africa.
According to Swiss Re's expertise, the convergence of factors that led to these historic losses is not unique to the US West Coast. As wildfire risks increase in Europe – evident in recent events in the UK, Portugal and Greece – the insurance industry must deepen its understanding of this peril. In a new article, our P&C Re experts outline seven key considerations for insurers, based on the experience in California:
Lessons learned from the wildfires in California
1. Limiting wildland-urban interface (WUI) to reduce exposure and ignition risk.
2. Balancing affordability and availability of insurance – accurate pricing is key to keep insurability intact, while potential subsidies can be an option to support affordability for high-risk populations.
3. Understanding wildfire modelling challenges: Forward-looking models incorporating human factors, vegetation and climate data are required. Tools like Swiss Re’s CatNet® and Bellwether’s predictive models offer promising advances.
4. Avoiding accumulation risk by setting clear coverage terms and implementing accumulation controls.
5. Making special considerations for claims impact. Wildfire claims in California highlight complexities relevant to Europe, including inconsistent displacement coverage, secondary damage risks, faster payouts, and the potential role of subrogation in shifting liability.
6. Enhancing preparedness and prevention, shifting from reactive suppression to proactive vegetation management and infrastructure upgrades.
7. Building back better, not just faster—resilient construction and zoning reduce long-term losses.
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