While the Los Angeles wildfires inch closer toward containment, estimates of insured losses continue to creep higher.
CoreLogic said the industry price tag of the Palisades and Eaton fires could land between $35 billion and $45 billion. Moody’s RMS, in adding an estimate of insured losses of between $20 billion and $30 billion, said what it called a “firestorm” will “prove the costliest wildfire in U.S. history.”
As the flames burn, Insurance Journal interviewed leaders of three insurtech companies that specialize in insuring areas prone to wildfire. They shared their perspectives on the peril overall and discussed how the ongoing fires could affect insurance moving forward.
IJ editor Allen Laman spoke to Delos Insurance Solutions, Kettle, and Faura. This is Part I on Delos. The interviews with Kettle and Faura will be published over the next two days.
Kevin Stein, Delos Insurance Solutions
Kevin Stein believes wildfires no longer fit into the standard insurance market.
Stein is the CEO of Delos Insurance Solutions, an managing general agency that focuses on homeowners insurance in California. When he and his cofounder, Shanna McIntyre, entered the industry, the pair thought “there was a little bit of a misunderstanding of wildfire,” Stein said.
Generalist perils covered by large, standard market insurers change slowly and can use actuarial methodology to be understood, Stein said. He noted that specialist perils, like cyber insurance, aren’t the same. These perils change rapidly or are complicated, meaning they require specialty expertise and data.
“We believe that wildfire is that now,” Stein said. “And I think the biggest difficulty is that it’s covered under home insurance and standard commercial property. And therefore, carriers have been saying, ‘Hey, I’ve been writing home insurance [for] 100 years. I should be able to do this.’”
Over the last seven years, Stein said he thinks carriers have finally come to realize that the old approach “doesn’t work for them.” He believes groups that view and approach wildfires in new ways will become more predominant in the California market.
Delos launched in 2017. Stein and McIntyre both have aerospace industry backgrounds. They recognized an opportunity to take new satellite imagery and model wildfire in higher spatial and temporal resolutions.
In other words, they sought to use the data for more accurate information at physical addresses, and use it to understand how those addresses could be affected by changing climate conditions. Delos partnered with Spatial Informatics Group (SIG), an environmental think tank made up of more than 100 academics who co-develop modeling for civil governments.
“All this proprietary research, coupled with this new proprietary algorithm – that turns into our wildfire underwriting,” Stein said. “Back through 2017, it’s been, by our assessment, head and shoulders above the other models in the industry.”
When asked on Jan. 13 if Delos insured any homes in the areas affected by the Los Angeles-area fires, Stein said, “Our view of risk did encapsulate this event. The areas that had the fires we had seen as really risky for this type of event. Therefore, we were not writing in those locations.”
Still, Delos said it has a broad California footprint. As larger carriers have been reducing exposure, Delos leans on its modeling to “write in a lot of places where people don’t,” Stein said, adding that the company has a “significant amount of sophistication around wind and weather.”
Most other models focus on vegetation, he said, but wind and weather are “the biggest driver of wildfire loss in the Western U.S. and a lot of other places as well.” Delos taps into detailed wind maps plus data on precipitation and vegetation moisture from SIG that inform the company’s modeling. This enables decision-making to more deeply account for current conditions and predict how they could change in the next couple of years.
Still, the models find areas in the state that are deemed extreme risk.
“It’s an unfortunate reality, but we do believe it’s a reality,” Stein said. “There are certain areas we’re not willing to insure. That’s a lot less than what other people are declining. We’re accepting a lot of business that other people are declining – [a] very significant amount.”
Stein said Delos accepts 65% of the business that the primary market is currently declining due to perceived wildfire exposure.
Topics
Catastrophe
Natural Disasters
InsurTech
Wildfire
Tech
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