Managing the growing threat of wildfires
In 2022, wildfires ravaged the western United States at a significantly higher rate than the 10-year average. According to the National Interagency Fire Center, in the U.S. there were 68,988 reported wildfires in 2022, compared to 58,985 the year before. These wildfires burned more than 7.5 million acres as they tore across the wilderness, causing loss of human life, structures and natural habitats.
The risk of extreme wildfires isn't going away anytime soon, either. 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 response to major losses running into the billions, 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, we continuously look at ways to provide protection and risk mitigation for our insureds." says Lawyer Davis, Senior Vice President Personal Lines at Nationwide E&S. "The E&S business within Nationwide has been around for over 40 years."
Nationwide is using modeling tools to gain a comprehensive understanding of the concentration of fire risk in wildfire-prone states. These tools examine 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 like probable maximum loss (PML) so we can continue to provide a product that is much-needed in places like California," notes Davis. "While other carriers are pulling out and reducing capital, we're a viable market and are offering a range of products and services to help insureds protect their homes and valuables."
Offering value-added solutions through Wildfire Defense Systems
In addition to ongoing risk analysis efforts, Nationwide E&S's Personal Lines team also offers an additional layer of protection for insureds through Wildfire Defense Systems (WDS).
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 WDS 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 900 fires in its 20-state service area.
"There is a great demand for this service, and it benefits everyone" says Davis. "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."