Profitably Underwriting Properties with Wildfire Exposure

4 min readMay 25

Today, the property insurance industry is shrinking. Revenues may be rising (due to higher pricing), but unit sales are down. The property insurance companies are backing away from all risks that they can’t quantify, especially those related to climate change, such as hurricanes and wildfires. This is especially true in states with significant wildfire risk.

Without tools to correctly price, underwrite and reserve for the losses, insurers cannot remain profitable. Therefore, they leave the market.

Enter Athena’s Voice of the Acre® with better wildfire insights. By studying the characteristics of the land in past wildfires, Athena can generate probabilities for insured losses, even in areas that are new to wildfire risk due to weather volatility. As a data vendor, offering Green/Yellow/Red underwriting decision flags, Athena makes it easy for underwriters to integrate Athena’s data directly into their existing software. (Read more here: Easy-To-Use trumps a Better Mouse Trap)

But what about the Yellow Flags?

This post is a discussion of the nuances that might sway an underwriter.

The example is a property in Novato California, near the border of Marin and Sonoma Counties.

Athena’s underwriting engine scored the property Yellow, with a wildfire destruction probability of 1:137. That means that, if a wildfire occurred anywhere in Marin County, the odds of this home being within the perimeter of the fire is 0.73% or about 3/4ths of one percent. The model is optimized to predetermine the ultimate wildfire perimeters. The goal of Athena’s conditional, geospatial, artificial intelligence risk model is to determine if a structure is inside or outside of the fingerprint of the wildfire.

Risk Assessment for 2023, report generated May 24, 2023

Homes in Marin County generally carry a higher risk than most homes in America. Half the land in the county is Federal, State, County or City Parks, or watershed set asides, conservation districts, protected marshland or land trusts. From a wildfire perspective, that means that Marin county has relatively few ecosystems, which translate into natural fire breaks.

But for this home, while the overarching risk in the county is high, the specific location is only elevated. Anthena’s analysis is based on 10,000 square feet (pixels) and an analysis of a series of concentric circles based upon the way embers are blown during a fire.

Each pixel has a unique alphanumeric string, which can be tied directly back to the source information. These unique identifiers also have a time series and a projection of vegetation growth.

So while the wildfire conditional risk is high, this specific address has several green (low risk) conditions. The probability of a burn at this location, the risk to the structure and the hazard potential are all low. If a fire breaks out, the intensity here is expected to be low.

But using the logic described above, where the similarity of the vegetation, or ecosystems, leaves the county vulnerable to having a wildfire run from one area to another similar area, a cluster of homes in close proximity with the same conditional risk scores, increases the risk described as “Building Exposure.” If a wildfire did burn one home in this neighborhood, it would more easily move from the first home to a second, and then through much of neighborhood, until it hit a change or fire breaks.

In other words, a single homeowner’s home hardening efforts help their neighbors, by reducing the neighborhood risk. This is not trivial as currently there are 60,000 communities at risk for wildfire damage. Many of these communities are only now becoming aware of their new peril, which has increased with climate change.

60,000 communities today, more in the future

It is known that living near trees reduces risk and improves health. It makes people feel good and, as we adapt to the changing weather patterns, shaded neighborhoods will become even more desirable.

Accurate information about the true risk will make informed decisions easier by underwriters, developers and homeowners.

Athena is a next generation InsurTech data vendor which produces synthetic data. The earth’s essential data is refined to make it easy for enterprises to use environmental information for future contracts, proprietary business decisions and risk management.