In 2020, wildfires ravaged the western United States. According to the National Interagency Fire Center, U.S. wildfires burned 10.27 million acres that year, setting a grim record. In addition to the loss of human life and natural habitats, U.S. wildfires caused $16 billion in damage1, ranking it the thirdcostliest year on record.
The risk of extreme wildfires isn't going away anytime soon. Hotter summers and other extreme weather coupled with lingering drought have created the ideal environment for intense, large-scale wildfire events over a longer season, in the U.S. and around the world.
How insurers are responding
In 2020, alone, wildfires cost insurance companies an estimated $7 billion to $13 billion2. In response to major losses, many insurers are opting out of high-risk wildfire markets, which leaves homeowners vulnerable. Some insurers are struggling to stay solvent in the aftermath of multiple billion-dollar payouts, too.
Other insurance companies are leveraging data to recalibrate their portfolios in order to balance high-risk wildfire zones with more moderate risks.
"At Nationwide E&S, we're always trying to be innovative," says Lawyer Davis, vice president of Personal Lines at Nationwide E&S. "We have been around for 40 years, and we have a lot of historical data. We use this, along with future projections, to help us make informed decisions about our risks so we can continue to be a viable market."
Nationwide is using modeling tools to gain a comprehensive understanding of the concentration of fire risk in wildfire-prone states. This tool examines factors like wind, drought and other weather conditions along with available fuel to create a risk score for different areas. Nationwide's leadership team uses these insights to make informed underwriting decisions so it can protect insureds responsibly while writing a profitable book.
"Taking underwriting actions helps us be more proactive in areas susceptible to wildfire so we can continue to provide a product that is much-needed in places like California," notes Davis.
Offering value-added solutions through Wildfire Defense Service
In addition to ongoing risk analysis efforts, Nationwide E&S's Personal Lines team is launched an additional layer of protection for insureds through Wildfire Protection Solutions (WPS).
This offering, which is available through Nationwide E&S's Personal Lines, provides Nationwide with a comprehensive analysis of the wildfire threat to insureds' properties. In the event of an active wildfire, this information is supplemented by regular field reports from dispatched ground crews to provide real-time information about the event. The WPS reporting dashboard features a dynamic map showing the assets of insureds relative to current wildfire threat perimeters and forecasted fire growth.
"WDS has trained firefighters that work with local fire departments," explains Davis. "If the fire department can get to the property, so can WDS."
In the event of an imminent fire, WDS coordinates with local emergency responders. If granted access by fire officials and conditions are safe, WDS crews can move in and take action to protect insureds' properties by applying fire-blocking gel or retardant, sealing non-mechanical home vents with fire-resistant tape, removing combustible items and furniture from outside the home, and clearing flammable debris. Once the threat has passed, WDS will continue to protect structures from post-fire, residual threats.
"In addition to being insured with the best E&S carrier, our insureds enjoy this second level of fire mitigation service that provides a sense of comfort to those living in high-risk areas," says Davis.
A win-win for insurers and insureds
WDS is an important tool in mitigating fire risk, and it benefits both insurers and those they insure.
"WDS is intended to provide a sustainable value proposition for our partners on quantifiable loss prevention during wildfire incidents," says Davis.
In addition to saving homes, the goals of WDS are to produce a desirable cost to benefit ratio, reduce overall wildfire risk while maintaining or growing market share, and provide policyholders with an excellent experience.
WDS has an impressive record since it launched in 2008. Since then, it is responded to more than 850 fires with a 100 percent safety record for all its wildfire response operations.
"There is a great demand for this service, and it benefits everyone" says Davis. "Last year, we lost 15 homes to wildfire. If we save just one home with this service, it saves that homeowner the distress of losing their home—and the program pays for itself."
For Davis, WDS is just one more way Nationwide takes care of its insureds and agents, alike. "As an organization, we offer competitive rates, competitive service and value-added extras," he said. "Over the long-term, we're there for our partners."