Stressors in desiccated regions
Stressors in desiccated regions
Kyle Langan, 2025
Dry winds
If you’ve ever lived in a place prone to wildfires, the sounds of strong wind absent rain may keep you up at night.
Scenario: Record-breaking snow water contents in the winter…
Those living in California probably experienced or at least heard about the epic skiing conditions at Mammoth mountain in early 2023.
That type of 1 in 100+ year precipitation grows vegetation intensely and increases the total amount of combustible material, or fuel load. After the intense precipitation, then growth, a period of severe drought conditions goes on for 2 years.
During the prolonged drought, a storm develops offshore, paired with a high pressure center, which can bring high-velocity winds. Hot, dry winds are stressors for areas like British Columbia, the Southwestern U.S., and Australia. So, why should Western Canadians, Californians and Australians read this essay? Risk mitigation. One of those readers’ priorities is transferring risk of fire to an insurer. Caution, however: property owner may find that purchasing fire insurance through brother-in-law-State-Farm-agent may present issues at the time of the fire and ensuing insurance claim payout. And sadly for purchasers, they can’t buy more fire insurance once the building starts burning.
So, you can’t predict a particular year that would have major wildfires. Purchasers must approach insurance like a yearly, monthly or even daily mitigation strategy. This means if today you buy $500,000 of new furniture, the first person you should brag about it to is your insurance broker. The broker will initiate a change with their underwriter partner and you will pay some additional premium through an endorsement to the policy. But the insurance is an expense until it’s not.
Tohoku
For example, if someone bought earthquake insurance for a commercial building, an earthquake insurance expert will set the purchaser up with a contract that they could buy for 500 years in a row, and if there were zero earthquakes until the 501st year, the insurance contract still would have been worth it, to be indemnified back to whole, based on the benefit of the insurance coverage versus the cost (premium) of the risk transfer. Insurance should be a fraction of a penny, or a penny at the most. That is, the payoff is 100-1. How is the insurance impacting your portfolio during a wind threat? The question I ask myself before purchasing insurance is: Am I better off because of it? Will this help me or make me worse off? An example of insurance likely hurting you is buying collision coverage for $12,000 in annual premium on a car that is worth $11,000. After only 1 year, the insurance is now hurting you, and alternative options should be considered by the purchaser (extreme example: in most cases, this is not how the cost takes shape).
A better example for a payoff 100-1 or greater is going back to the earthquake example. If the replacement cost valuation of a commercial building is $30,000,000, that is the building’s exposure level. If the building suffered a catastrophic loss from a Tohoku-like earthquake, the stakeholder’s successful risk transfer will prove to be true mitigation at the time of the loss. An annual premium of $300,000 would be the minimum standard for a valid earthquake insurance solution. Except maybe Goldman Sachs, most of us probably do not have a time horizon for risk mitigation more than 100 years.
However, naturally, we would love an even better cost-benefit. So, if $60,000 in annual premium? Example of a 500-1 payoff before considering the deductible.
Stressor: Gusty conditions paired with low humidity levels
Santa Ana Season starts in October, on average, and goes through January, sometimes getting into the start of February. [2] Even in winter time, CA can remain dry, windy, and sometimes hot. On their SoundCloud podcast, Paul Pastelok and Joe Lundberg provide continuous guidance for concern of winds lining up for an offshore presence. [3]
Lightning can naturally ignite fires (ex: August 2020 California lightning siege. Santa Ana Winds can then fan flames of blazes and cause them to evolve rapidly into massive wildfires. However, nearly 90% of fires are caused by humans in some way (ex: electricity power lines), and due to this fact, predicting wildfire tolls and acreage is very difficult. [8]
The January 2025 conditions in California resembled the conditions leading up to the 1980 South Australian bushfires: Late February 1980 saw a virtually rainless summer, parlayed with a very wet spring in 1979 prior to the drought conditions. Then 3 years later, February 16th, 1983 was a disaster in South Australia — half a million acres or 2,080 km2 burned, killing 75 people. [9]
Areas that need strategic preparation
Western Canada.
The interior Northwest and the northern Rockies face wildfire risk: Washington, Oregon, Idaho, Montana, Northern California and northern Nevada may confront exposures because fires are always reasonably expected in times like June or the first half of July. However, this “region’s peak of wildfire activity” is usually July into early September.” [10] Many of these areas likely already have scheduled “prescribed burns,” or intentional power outages, especially in conditions of severe drought and extreme weather like Australia can experience.
New Jersey forests.
The Florida Peninsula can experience brush fires in the spring with any drier-than-average conditions. [11]
Alaska has led the country in wildfire activity in past years, with nearly twice the amount of land in Delaware burned in 2022 from wildfires. However, a fire season is more defined on the impact to the public and not by the acreage burned, according to Pastelok. There are no better examples of this sentiment than the Lahaina fire in 2023 or the 2018 wildfire season when the Camp Fire killed 85 people in Paradise, CA.
References
Danielle, M. (2025, January 13). Death toll climbs to 24 and thousands of structures destroyed in California wildfires. Palisades Fire in California rages out of control. https://www.accuweather.com/en/weather-news/palisades-fire-in-california-rages-out-of-control/1731028
Glenny, A. (2025, January 13). Intense Santa Ana winds to resume early this week around Los Angeles. https://www.accuweather.com/en/weather-forecasts/intense-santa-ana-winds-to-resume-early-this-week-around-los-angeles/1732922
[1-3]
[2, 6-8]
Lada, B. (2023, April 12). AccuWeather’s 2023 US wildfire forecast. Retrieved from https://www.accuweather.com/en/weather-forecasts/accuweathers-2023-us-wildfire-forecast
[9]
“About Ash Wednesday”. Country Fire Authority Victoria, Australia. Archived from the original on 23 March 2008.
Bureau of Meteorology. “Climate Education: Ash Wednesday, February 1983”. Australian Government. Archived from the original on 8 August 2013.
[10-11]
Term of the week: Fuel load. interfire.org. Retrieved from https://www.interfire.org/