Wildfires Wreak Havoc around the World
Australia, Canada, Spain, France, Italy, Greece, California: They’ve all experienced devastating wildfires. Is there a connection?
In February bush fires swept through large parts of the state of Victoria, killing 173 people and destroying more than 2,000 homes. The fires spread so rapidly that firefighters couldn’t contain them, and many residents received virtually no warning before being engulfed in flames. It was the worst natural disaster, and the worst fire, in Australia in 110 years, since a typhoon killed 400 people in 1899.
The Australian government has launched an investigation in an attempt to assess how effective were the warnings given to residents of the stricken areas, and whether mandatory evacuations should have been ordered.
In late July massive forest fires swept through British Columbia, destroying hundreds of thousands of acres of timber, and displacing more than 10,000 people.
The Insurance Bureau of Canada took pains to explain that, contrary to popular belief, “acts of God or acts of nature are not excluded in any property insurance policy in Canada.” It assured worried policy holders that Canadian insurers “routinely pay for damage resulting from natural disasters, including wind, storm, rain, hail and wildfires.”
At the same time Spain, France, Italy and Greece were hit by a series of deadly fires, which resulted in the deaths of 12 people, 6 of them firefighters. It took firefighters, battling against stifling heat and strong winds several weeks to bring the blazes under control. According to Guy Carpenter’s Instrat unit, “the insurance bill is likely to run to hundreds of millions of Euros.”
“More recently, massive fires have erupted around Athens and to the north of the city, destroying hundreds of square miles of woodland, but fortunately causing no deaths. Large portions of the once leafy suburbs of the Greek capital now lie in ruins, and summer temperatures are expected to increase as a result.
California has experienced an almost non-stop onslaught of wild fires, beginning in July in the Santa Cruz Mountains and continuing on down the coast around Santa Barbara, and most recently in the mountains northwest of Los Angeles.
While fires in the drier regions of the planet are nothing new, the number that have occurred so far this year, and the apparently increasing ferocity they exhibit, has raised some serious concerns with in the insurance industry. Experts worry that the effects of global warming and the changing climate – hotter and drier in many regions – will continue to result in a greater number of fires of greater intensity.
The Associated Press reported that scientists in Australia, with its harsh environment, think it is set to be one of the countries most affected by climate change. “Continued increases in greenhouse gases will lead to further warming and drier conditions in southern Australia, so the (fire) risks are likely to slightly worsen,” said Kevin Hennessy at the Commonwealth Scientific & Industrial Research Centre (CSIRO).
The fires burned out more than 330,000 hectares (815,000 acres) of mostly bush land in Victoria, but a number of vineyards in the Yarra Valley were also destroyed. The Insurance Council of Australia and its two largest insurers, QBE and IAG have said it is too early to estimate the insured losses, but they will be substantial.
Lloyd’s assessed the mounting heat and fire phenomenon in an article on its Web site [www.lloyds.com]. The conclusion: Fires in southern Europe have increased in recent years, and are likely to continue to do so. Lloyd’s cited the Intergovernmental Panel on Climate Change’s Fourth Assessment Report which predicts that “climate change is projected to worsen conditions (high temperatures and drought) in a region already vulnerable to climate variability. Climate change is also projected to increase the health risks due to heat waves and the frequency of wildfires.”
As Lloyd’s points out, the insurance industry is in the spotlight, as the dangers increase. It faces “growing exposures” as a result of “longer fire seasons, hotter summer temperatures, droughts, and strong winds,” coupled with continuing “human development” in vulnerable areas and an “accumulation of hazardous fuels.”
Swiss Re is urging governments to take a ‘more joined-up approach to managing risk.’ At a recent conference in Helsinki it laid out suggestions on how governments can improve the way they tackle large-scale disasters and work more closely with insurers to deal with crises quickly and cost-effectively.
Swiss Re is also aiming to raise awareness of the need to close the gap between economic and insured losses. The reinsurer pointed out that “insurance covers only a fraction of total losses from natural catastrophes.” In 2008, natural catastrophes globally caused total losses around $259 billion, of which $44.7 billion (around 17 percent) were covered by insurance.
At a press briefing Swiss Re’s Chief Risk Officer, Raj Singh, explained: “Our risk landscape is constantly evolving, and risks are highly inter-connected. As the financial crisis has shown, the risks we face can change suddenly and unpredictably.
He added that in the years ahead one of the industry’s major challenges will be dealing with climate change, which will also be faced by companies, governments and the general public. Due to global warming, it’s expected that natural catastrophes – storms, floods and droughts – will increase “both in frequency and severity.” He also warned this in turn will create “other impacts such as effects on public health, and consequences such as food security and possible human conflict.”