Receive instant alerts for news on your actions. Claim your 1-week free trial for Street Insider Premium here.
ARLINGTON, Va., July 7, 2021 (GLOBE NEWSWIRE) – Willis Towers Watson and The Nature Conservancy (TNC) have released an analysis that shows how the ecological management of forests, which reduces the risk of severe forest fires in adapted forests fire, can be combined with insurance to significantly reduce insurance costs.
By modeling the insurance impact of controlled burning and ecological thinning of overgrown forests, researchers at TNC and Willis Towers Watson were able to quantify the savings in insurance premiums. In turn, these savings could be used to finance further investments in sustainable forest management.
The report, Forest fire resilience insurance: quantifying the risk reduction of ecological forestry with insurance, notes that the practice known as ecological forestry, which includes prescribed burns and the removal of small trees and other vegetation in overgrown forests (i.e. while reducing the likelihood of forest fires extremes in these communities.
The report explores how insurance savings from ecological forestry could be captured and used to pay debt service on bonds, which would be issued to pay for the ecological treatment of forests. Thus, insurance savings can help finance or finance the ecological treatment of forests, creating a “virtuous circle”.
For the first time, the project tested “parametric” insurance applied to the intensity and area of forest fires, which reduced both losses and premiums. Such a parametric product, which can provide instant access to funds to pay for costs not covered by P&C insurance, would be new to the market and provide an innovative way for insurers to cover fire risk.
The project used a Placer County Water Agency’s ecological forest restoration project in the Tahoe National Forest in northern California. Researchers found that ecological forestry in the watershed significantly reduced the risk of forest fires for the 81,000 homes in and around the watershed, which in turn could lower overall home insurance premiums by $ 21 million. dollars per year.
“For the first time, we have shown that insurance modeling and pricing can explain the significant forest fire risk reduction benefit of environmentally friendly forest treatment,” said Dave Jones, senior risk manager. , The Nature Conservancy and former California Insurance Commissioner. “These widely supported forest treatment practices, prescribed burns, and ecological thinning offer the triple benefit of improving forest health, reducing the risk of catastrophic forest fires, and providing a pathway to keep insurance available.” . Insurers’ models currently do not take forest treatment into account, but now that we have shown that it is possible to do so, we expect insurers to start doing so.
Due to the high risk of forest fires and the associated losses, insurers find it difficult to purchase insurance in areas at risk of forest fires. At the end of 2020, the California Department of Insurance reported that between 2018 and 2019, non-renewals by insurers increased by 61% for homes in zip codes with a moderate to very high fire risk zone, and a 203% increase in the top 10. counties most exposed to high to very high fire risk homes. The results of the study indicate that financing more environmentally friendly forest treatments can reduce the risk of forest fires and provide a better opportunity for insurers to continue to purchase insurance in high-risk areas.
“The risk of wildfires in California and the western United States is becoming uninsurable due to the increasing risks of climate change and forests overrun by fuel,” said Dr. Nidia Martínez, director of the climate risk analysis, Willis Towers Watson. “The cutting-edge analyzes described in this report provide insurers with the tools to integrate the true value of forest fire risk reduction through green forestry into underwriting decision making. The product innovations we present offer new approaches to protect communities and businesses at the Wildland-Urban interface through insurance. “
“If we are to continue with insurance in these areas and reduce the loss of life and property, we need a lot more private and public funding for ecological forestry in national forests and elsewhere,” Jones said. “These expenses are truly an investment in the future of these regions.”
The results of the case study are applicable to other similar forest regions in California and other western states. The work also opens up the possibility of considering combining nature-based risk mitigation and risk transfer to other fire-prone regions of the world.
The report also includes a series of recommendations, including for federal, state and local policymakers to fund more forest treatments on national and other forest lands, so that communities and businesses can see the risk reduction and the benefits of resulting insurance presented in the document.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is one of the world’s leading consulting, brokerage and solutions companies helping clients around the world turn risk into growth. With roots dating back to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, maximize rewards, cultivate talent, and increase the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talents, assets and ideas – the dynamic formula that drives business performance. Together, we unleash the potential. Learn more about willistowerswatson.com.
About nature conservation
The Nature Conservancy is a global conservation organization dedicated to conserving the lands and waters on which all life depends. Guided by science, we create innovative, on-the-ground solutions to our world’s most difficult challenges so that nature and people can thrive together. We are fighting against climate change; conserve land, water and oceans on an unprecedented scale; providing sustainable food and water; and help make cities more sustainable. Working in 72 countries, we use a collaborative approach that involves local communities, governments, the private sector and other partners. To learn more, visit www.nature.org.
Ileana Feoli: +1 212 309 5504 [email protected]
Source: Willis Towers Watson Public Limited Company