AXA XL supports CCRS report on rising wildfire risks and role of re/insurance

AXA XL supported the publication of a new report by the Cambridge Centre for Risk Studies (CCRS), which highlighted the increasing frequency and severity of wildfires in California and the critical role of the re/insurance industry in enabling an effective recovery after such events.

The research showed that wildfires have joined hurricanes and earthquakes as some of the most economically damaging events facing society and the re/insurance industry today. It revealed that extreme wildfire rates have more than doubled globally over the past 20 years.

The report stated, “The devastating fires in Los Angeles (LA) in January emphasised the need to better understand the peril to better protect people and property in a rapidly changing environment in terms of both hazard and exposure offset by stricter building codes.”

Over the past 36 years, losses from California wildfires have surged. The area burned has increased 16-fold, 13 times more properties have been damaged, and economic losses have grown 50-fold.

CCRS highlighted the vital role of re/insurance in recovery, noting that immediately injecting billions of dollars in non-recourse funding to families and businesses, in a structured way, is the most effective method to help communities recover quickly and be better prepared for future events.

The report also underlined the positive impact of proactive mitigation spending and planning. For example, it emphasised the importance of stronger building codes, specifically California Building Code (CBC) Section 7A, issued after 2008.

CCRS’s review of FEMA literature found that houses built to code were almost three times as likely to survive a fire, with projected savings of $24 billion over 75 years for residential property, or $325 million annually for structures built to code.

Trevor Maynard, Vice Chair & Director of Systemic Risk at CCRS, commented, “We are grateful for the support of AXA XL in funding this research which clearly shows that strong building codes can protect communities.”

Andrew MacFarlane, Head of Climate at AXA XL, said, “Adapting our built environment, investing in mitigation and creating more resilient communities, is especially important given the expected impacts of changing frequencies and severities of catastrophic events.”

Jonathan Gale, Chief Underwriting Officer, AXA XL Reinsurance, added, “The Re/insurance industry plays an important role in recovering from natural disasters in paying out billions of dollars in claims. And this latest study by CCRS into disaster resilience and recovery from wildfire underscores the benefits of pre-event investment and the post-event opportunity to achieve a reformative recovery.”