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, Å˽ðÁ«´«Ã½Ó³» 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 fires could affect insurance moving forward.
Isaac Espinoza and Brian Espie, Kettle
Could parametric insurance become a bigger piece of the wildfire insurance market?
Kettle is an insurance and reinsurance managing general agent built around a proprietary wildfire model that was developed using artificial intelligence and machine learning technologies. Company leadership believes these technologies are better suited to predict catastrophic climate risk.
The wildfire specialty company launched in 2020 underwrites on behalf of insurers and reinsurers, mostly in Bermuda and London. Much of what Kettle does currently is on a parametric basis. Everything the MGA writes is in a wildfire-prone area.
California is “far and away our largest state,” explained Brain Espie, Kettle’s chief underwriting officer. Kettle writes across the continental U.S. and has thousands of insureds between its insurance and reinsurance products. Espie said Kettle does have exposure in the areas affected by the Los Angeles wildfires.
“Because we do play a big part in the parametric side, and the way that product is structured, I think we’re going to be well-positioned to be one of the fastest to not only know what our losses are in total but also to have them fully paid out,” said Isaac Espinoza, Kettle’s CEO.
“One of the advantages of parametric products is [they are] pretty straightforward,” he added. “There’s less dispute about if it is indeed a claim, and it’s already pre-determined what that amount is upon payout.”
Kettle’s parametric coverage triggers if a wildfire crosses the boundary of a covered property. When asked how Kettle can successfully underwrite risk in wildfire-prone areas, Espie pointed to “the amount of data that our model is able to ingest and output.”
That model uses about 130 terabytes of data across 40 or so geospatial, spatial and satellite real estate data sets. It is trained by running millions of simulations in the cloud, allowing Kettle to determine with precision what properties truly have higher exposure. As time goes on, more data will be fed into the model and Espie said he expects it to continue to improve year by year.
“I think with a peril like wildfire, you really do require a lot of data and a lot of granularity to be able to have that risk precision and manage a balanced portfolio,” Espie said.
As tragic as the fires have been for those living in the affected areas, Espie said the events provide an opportunity for Kettle to show that the technology it uses in its model can provide advantages in predicting wildfire risk.
Espie and Espinoza believe there is also an opportunity to show that parametric coverage for wildfire can provide advantages to insureds who need quick payments following disasters.
Kettle is careful not to bill itself as the only solution for insurance needs. It instead views itself as a complimentary part of an overall risk management plan for insureds, particularly on a commercial basis. For example, some of the MGA’s policyholders may buy a nonparametric policy for coverage needs other than wildfire and buy a Kettle policy specific to that peril.
Only a small percentage of the 7,000 to 10,000 wildfires that burn across California each year cause any damage, Espie said, and catastrophic damage to the extent we’re seeing now is “even a smaller minority.”
“I think that there’s an instinctual reaction to run away from the fire and just say there’s no way to insure this peril, or the state of California is uninsurable as a whole,” he said. “With enough data, and enough technology, and enough focus on wildfire – you can discern the areas of the state that are more exposed and more vulnerable.”
“And you can provide coverage to a lot of people that otherwise get painted with a broad brush.”
Topics Catastrophe Natural Disasters InsurTech Wildfire Tech
Was this article valuable?
Here are more articles you may enjoy.
Å˽ðÁ«´«Ã½Ó³» Group Touts Major Victory Over FCC Rule That Would Have Limited Robocalls 
Diminished Value Not Covered by Standard Auto Policy, Massachusetts High Court Says 
Where Homeowners Rates Are Rising—and Who Is Raising Them Most 
Property-Catastrophe Reinsurance Rates Will Stop Dropping Post Wildfires: Execs 
