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AM Best’s Mosher: We’re looking much more closely at insurers’ wildfire risk.
  • Timothy Darragh
  • May 2019
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AM Best is looking carefully at insurers' exposure to wildfire risk and following the massive blazes of 2017 and 2018, companies now are too, said Matthew Mosher, AM Best executive vice president and chief operating officer. As a changing climate is creating greater potential for wildfires in fire-prone areas, insurers have to change with them, he said at the National Association of Insurance Commissioners' Spring National Meeting in Orlando, Florida.

“The companies are going to make every effort and it's a priority, after this last year, to get their arms around what their potential exposure is,” Mosher said.

The companies are going to make every effort and it’s a priority, after this last year, to get their arms around what their potential exposure is.

Matthew Mosher
AM Best

In the past, wildfires were considered a “second-tier” catastrophic event, not on the plane of hurricanes and earthquakes, Mosher said to the catastrophe risk subgroup of the Property and Casualty Risk-Based Capital Working Group. The wildfires of the past two years changed that, he said.

“We never saw companies have much of an impact other than an earnings hit for wildfire up until 2017,” he said. “So it really just didn't hit the radar screen because it didn't have a major impact on balance sheets or income statements.”

Wildfires, however, battered California the past two years, with the Camp Fire in November becoming the most-destructive wildfire in California history, with 18,804 structures in Butte County destroyed. Mosher said AM Best now is looking more deliberately at how P/C insurers plan for and consider the risk of wildfires.

“It wasn't something that we looked at very closely until the last two years, and now we're looking much more closely at what the exposure is that companies have relative to this kind of loss,” he said. But companies are behind the pace of change because they haven't had much exposure to the kind of modeling for wildfires that they've had for other events, he said. Probabilistic models are relatively new and companies need to get the right data into them to determine their risk, he said.

In assessing companies' exposure to wildfire risk, Mosher said, AM Best first looks at the insurer's balance sheet and its ability to get support from affiliates or the capital markets after an event. But AM Best also will consider other elements, such as how often companies test their risk, he said.

Another issue is how frequently a company reviews its exposure data. “Is it once a year ... or is it something that you're looking at on a quarterly, monthly or even daily basis as you're working through your business?” he said. “This was a big issue for some of the companies that we saw that had issues with the 2018 wildfires.” The new reality should be driving companies to have a deep conversation on governance questions, he said. “The most important thing we're trying to get is really to make management think about it and come back with a well-thought-out view of, this is the risk we have, this is what we find acceptable, and have that discussion with them,” Mosher said.

Timothy Darragh is associate editor, BestWeek. He can be reached at

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