Navigating Wildfire Risk with the Guidewire HazardHub Enhanced Wildfire Risk Score

Extreme weather is worsening wildfire conditions, with recent blazes consuming thousands of acres in the Western U.S. In the past month alone, significant wildfires have erupted across California, including the 14,168-acre Corral Fire in San Joaquin County; a 10,000-acre fire near Santa Clarita in Los Angeles County; and the 8,500-acre Bonny Fire in Riverside County. Each fire reignites fears of disasters like the 2018 Camp Fire, which caused $10 billion in insured losses.

Changing weather patterns, increased temperatures, prolonged droughts, and population shifts into wildland-urban interface (WUI) areas have all contributed to heightened wildfire risks. As a result, insurers face the dual challenge of accurately assessing and pricing these climate risks while ensuring a sustainable insurance market.

This situation is further complicated by increased wildfire severity that has outpaced inflation, leading to replacement cost estimates often being lower than actual costs. Carriers and homeowners need more accurate estimates reflecting the true impact of severity and inflation. It is more important than ever for underwriters and homeowners to re-evaluate coverage limits at renewal.

Guidewire HazardHub Enhanced Wildfire Risk Score

The Guidewire HazardHub Enhanced Wildfire Risk Score is designed to address these challenges. This model provides a precise and comprehensive wildfire risk assessment for national, state, and local communities — and for every individual property address in the US and Canada. Here’s how it works:

Granular Data Analysis: The Enhanced Wildfire Risk Score provides a granular analysis of risk enabling a more precise assessment compared to traditional models that rely on broader territorial boundaries like zip codes or municipalities.

Key Risk Factors: The model evaluates several critical factors, including:

• Distance to fuel load

• Presence of katabatic winds

• Historical wildfire data

• Precipitation levels

• Proximity to vegetation burn points

Versatile Outputs: The Enhanced Wildfire Risk Score offers various outputs, including grades (A-F), descriptive risk levels (e.g., high, medium, low), base scores (1-10), and composite scores (0-60).

Benefits for Insurers and Policyholders

Improved Underwriting: By providing a detailed view of a property’s wildfire risk, insurers can make more informed underwriting decisions, improving risk selection and policy acceptance.

Enhanced Pricing Accuracy: Accurate risk assessment enables insurers to tailor pricing and coverage based on the actual wildfire risk, ensuring that policyholders in high-risk areas are adequately covered without overcharging those in lower-risk zones.

Streamlined Workflows: The integration of wildfire risk data directly into underwriting and policy workflows enhances efficiency and reduces administrative burdens.

Regulatory Compliance: Meeting new California insurance regulations, the Enhanced Wildfire Risk Score helps insurers stay compliant while minimizing business disruptions.

Real-World Impact: KW Specialty has seen a 200% revenue growth year-over-year by leveraging HazardHub data for better wildfire risk identification and pricing, demonstrating the practical benefits of this advanced model.

As wildfire season intensifies, the need for accurate and comprehensive risk assessment tools becomes paramount. Guidewire’s HazardHub Enhanced Wildfire Risk Score offers a powerful solution for insurers, enabling them to protect their portfolios, improve underwriting and pricing accuracy, and enhance regulatory compliance. By adopting this risk score and model, insurers can better navigate the challenges of wildfire risk, ultimately benefiting both their business and their policyholders.

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