Climate change linked to increased wildfires: Lloyd’s

Insurance carriers can expect to see an increase in losses from wildfires, as average temperatures increase worldwide, while Canada ranked third in economic losses due to wildfires over the past 23 years, a recent Lloyd’s report warns.

“The combination of predicted increase in global temperature and extreme climatic conditions, coupled with a growing world population and land use changes is expected potentially to lead, overall, to increased fire occurrence, area burned and probably also more severe and therefore damaging wildfires,” states the report, titled Wildfire: A Burning Issue for Insurers? “An overall increase in losses might therefore be expected.”

Quoting from a 2005 article in Climatic Change, Lloyd’s stated that in Canada, an increase – by 74% to 118% by 2100 – in area burned “has been suggested.”

“In California, where a high population density in the Wildland Urban Interface puts lives and property at a particularly high risk, estimated future changes in area burned range from a 41% increase for the San Francisco Bay area and the Sierra Nevada to an 8% decrease for the north coast of California,” according to the report, released Sept. 24.

While property is the insurance line “most exposed” to wildfires, there is also an exposure for liability and business interruption writers.

“Commercial property policies with business interruption coverage vary widely with regard to coverage of business income loss due to order of civil authorities,” Lloyd’s stated. “Some policies require direct physical damage to the property before business interruption coverage is triggered. Generally, under these types of policies, where the order of civil authority (and not physical damage) causes the business interruption loss, coverage is not triggered.”