Specialist surplus lines coverage needed for wildfire zones

“When those fires get going, they burn for a long time … sometimes for weeks”

Specialist surplus lines coverage needed for wildfire zones

Catastrophe & Flood

By Sam Boyer

Wildfires are brutal, fast, and indiscriminate in the carnage they wreak. Yet, in some states, they’re so commonplace they have their own season.

Like floods, hurricanes and other natural events, they’re also more prone to strike some regions than others. For insurance clients in these high-risk wildfire areas, regular homeowner insurance may not be available – which is where specialist insurers can step in.

Bill Gatewood, vice president at Burns & Wilcox, said there isn’t really such a product as “wildfire insurance”, it was just a matter of who would offer homeowner insurance in wildfire zones.

“We have programs that will write insurance for people that live in wildfire prone areas,” he said. “There are several areas out west where wildfire is a season. They just have it every year. California is a big one, New Mexico, Colorado, Utah, there was a big one in Wyoming last year.

“In terms of something as catastrophic as wildfire, out west it’s fairly routine because people just know it’s going to happen. They understand it and they plan for it.”

But the wildfire season in the US is getting longer, with more damage. And as spring turns to summer, this will be a major concern for homeowners and their insurers.

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In fact, last month was the worst wildfire March on record in terms of acreage, according to the National Oceanic and Atmospheric Administration (NOAA), with 2,166,002 acres burned. This was largely due to fires that spread through the Oklahoma panhandle, northern Texas, and western Kansas in early March, reportedly spreading as fast as 70mph, killing at least seven people and thousands of livestock in drought-stricken cattle country.

“When those fires get going, they burn for a long time … sometimes for weeks,” Gatewood said.

In the same vein as insuring homes in high-risk earthquake, tornado or hurricane areas, insuring property in wildfire-prone areas is a matter of assessing whether or not to take on the exposure.

“It’s what we do,” Gatewood said. “We work with specialty insurance companies in the surplus
lines world, and we’re able to put together programs that can take on that kind of risk. We’re able to get a lot more premium for it, so pricing is going to be different. It’s just where we fall: we’re specialists at underwriting really hard-to-place stuff. The unique thing, a standard insurance company can’t come up with a good price for it because they can’t write a million of them and get a very predictive pricing model – sometimes they’re just so unique they have to go into the surplus lines world and that’s what we do.

“Any time it comes to natural disasters, we pretty much have a product to help agents get that coverage that their clients need.”

Related stories: 
The top states at risk for wildfire damage: Report
Wildfire risk skyrockets across US: what producers in at-risk areas need to know

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