Fire management: How insurers can best prepare for natural hazards

Phil Cottle, head of forestry at Specialty MGA UK, outlines how insurers in the forestry, plantation and reforestation sector can mitigate against fire risk.

With the rise of extreme weather events across the globe, farmers and landowners are having to deal with increases in risk and uncertainty. The increases in flooding and drought over the last decade have highlighted the importance of preparing and planning for climate-related events.

In the forestry, plantation and reforestation sector, however, the most frequently insured natural hazard is fire.

Rising global temperatures drive these extreme climate events. In any country of the world one can see steadily rising temperatures over the last 40 years, to the extent that the global target of containing global average temperature to below +1.5°C over the long-term global mean is sadly now predicted to be exceeded in the next four or five years.

Under these conditions it is imperative to assume fire will strike without many of the precautions discussed below being in place.

According to the European Space Agency, fire impacts four million square kilometres of Earth’s land each year. In recent years, we have seen fires destroy huge amounts of land across the world, ranging from Australia and the US to Greece and Turkey.

Even in the UK, last summer fire crews attended to a record number of wildfires, with Home Office figures showing that there were over 4,000 serious outdoor fires – 22 percent higher than in 2018 and over four times the seasonal average.

For those in the insurance industry, when assessing, understanding and pricing the risk of fire it is essential to gather quality data.

This firstly requires working collaboratively with local organisations on the ground, as insurers often rely on data from local forestry operations and public authorities, as well as national forest fire databases.

Technology can help improve access to data, allowing insurers to measure the impact and spread of fires, using satellites to map burn scars.

These satellite images have greatly improved in recent years, and some of the most advanced systems have a resolution of about 30 metres by 30 metres. This level of accuracy provides higher value data, as it is easier to look at a managed plantation over the last 20 years and compare the rate of burn with that outside the plantation.

Globally, the data shows that effective management makes a significant difference to the losses suffered as a result of fires.

Forested lands, which are often unmanaged or provided with minimal management by the state, have distinctly different results to insured clients in terms of land lost each year to fire. The ratio of losses can sometimes be as great as 20:1, meaning an unmanaged forest burns 20 times more than a managed one. In Australia, the Black Summer event of 2019/20 saw 14 million hectares of forest and scrubland burnt, less than 1 percent of which was from managed forest enterprises. This is a clear demonstration of the value of forest fire management.

Data can give plantation managers a clear idea of what investment is needed and where. There are detailed outlines of what a fire management plan may look like, and these are available from ForestRe, an MGA.

Generally, managers need to consider prevention, protection and suppression. To protect them, such fire management plans would include the need to have firebreaks around their perimeter. The size of these firebreaks will inevitably depend on the level of protection needed. They can often be anywhere between 20 to 50 metres wide, and sometimes as large as 100 metres.

Internally, plots should be broken up as they are planted, with a 20 to 30 metre firebreak between them. Often, roads can serve as a firebreak.

Even well-protected plantations will need to make serious investments in fire prevention, with forestry companies often spending as much as $30 to $40 per hectare. This will include access to water, tools and equipment, plus hoses to move the water around the plantation on the back of trucks. Helicopters are the most efficient at getting to fires quickly and dumping water with retardant. All of this equipment needs to be supported by trained fire brigades, fire outbreak warnings or patrols in the forest.

Prevention is in large part about detecting fires early when they ignite, so that they can be contained before they spread out of control. Different operations will have different means of detection, including high-tech and low-tech methods.

These can range from people physically patrolling a plantation, to camera detection and satellite monitoring. Algorithms are designed to spot disturbances in the air created by fires, via the smoke generated, and can differentiate between an actual wildfire or other causes of smoke.

Once spotted, a fire needs to be suppressed, and many policies provide cover for the cost of fighting fires. This creates an incentive to address the issue as early as possible, as clients will not be liable to pay for the cost of putting the fire out in the event of an emergency.

Usually, the insurer will cover the costs up to a specified limit, depending on the size of the operation. The risk of underground fires which can reignite also means that extensive ‘mopping up’ after the fire is put out is needed, to ensure that the site is safe.

With fires continuing to increase across the globe, it is now more important than ever for farmers and insurers to work together to take steps to prepare and respond effectively.