The insurance industry's losses due to wildfires are rising, with an escalation in wildfire risk beyond the traditional fire seasons and regions, commented the director of wildfire models, North America at Moody's, Firas Saleh.
Escalated wildfire severity and expanded exposure in wildfire-prone areas, alongside an increase in reconstruction costs, have all contributed to devastating impacts on insurers’ bottom lines, he added.
Explaining why the situation matters, Mr Saleh pointed out:
-
In South Korea, the largest wildfire ever recorded has devastated forests and towns, destroying priceless cultural sites and causing significant loss of life.
-
This escalation in wildfire risk is due to several key factors. Increased urbanisation in high wildfire hazard areas and development in the wildland-urban interface contribute to the growing wildfire threat.
-
As these challenges persist, it is crucial to understand the underlying causes and continue to implement comprehensive risk preparedness efforts that extend beyond traditionally fire-prone regions.
South Korea
Separately, Moody’s Ratings commented on the credit implications of Korea’s wildfires for Korean non-life insurers.
Moody’s Ratings AVP-analyst Gil Jo said, “The recent wildfires in Korea's Gyeongsangbuk-do region are likely to lead to higher claims for Korean non-life insurers. However, we expect the ultimate losses to remain manageable for several key reasons: the affected areas are primarily mountainous and rural; a significant portion of the damaged properties are uninsured; and non-life insurers typically cover only 10%-20% of the total losses resulting from domestic wildfires. Additionally, insurers' net losses will be limited due to their reinsurance arrangements, particularly for excess-of-loss coverage.”
South Korea’s most deadly wildfires that razed the southeastern part of the country began about two weeks ago and have burned more than 48,000ha, equivalent to about 80% of the area of the capital, Seoul.
Japan saw the worst wildfires since 1975 in early March around the northern city of Ofunato in the Iwate region. It blazed for more than a week over 2,900ha.