The increase in wildfires and their impact on home insurances
The magazine Política Exterior publishes an article analysing some economic impacts from climate change on Canada and the US. Initially it was thought that the countries of the northern hemisphere could benefit in some ways fdue to the the increase in temperatures (new crops, more productive, new habitable areas...). However these initial forecasts did not take into account the negative impacts caused by the devastating fires (mega-fires) that are increasingly frequent and difficult to contain, which also have a very direct impact on the insurance business.
Key points of the article:
- More intense, long lasting and frequent wildfires. In Canada, 9.2 million hectares of forest have been destroyed by fire so far in 2023. By comparison, the California fires of 2020 affected an area five times smaller. According to the UN Intergovernmental Panel on Climate Change, summer heat waves will increase forest fires by 14% by 2030, and by 30% by 2050.
- Impact on home insurance premiums: According to the article, some 160,000 people have had to leave their homes in Canada, which are now increasingly difficult to insure because of the prohibitive price of policies, if they are available at all. In the US, State Farm, one of the country's largest insurers, has stopped insuring homeowners' risks in California. Between 2017 and 2021, US wildfires caused $80 billion in direct losses.
- Changing consumption patterns: These warmer summers are leading to changes in energy consumption. For example, energy consumption peaks in Canada are now in summer rather than winter.
- Health risk. In mid-June, the skies over Washington, New York, Pittsburgh, Chicago and other East Coast cities had unbreathable air due to smoke from the Canadian fires. According to the World Health Organisation, air pollution causes 6.7 million premature deaths from respiratory diseases each year, most of them in developing countries.