As climate change compounds wildfire risk, organizations play a critical role in protecting their workforce before and after an event.
Key Takeaways:
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A warmer and drier climate is expected to compound wildfire risk globally across a variety of ecosystems.
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Indirect effects, such as extended periods of wildfire smoke post-event, can pose disruption risk for homeowners and workforces.
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Organizations need to think beyond property damage within risk management to consider the total cost of climate hazards on their employees, including both physical and mental health, as well as financial well-being.
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Understanding the North American Wildfire Landscape
North America has now experienced at least one +$1 billion wildfire loss event in eight of the last 10 years. Prior to that, this magnitude of loss occurred in only five out of the previous 50 years.
While the 2023 U.S. wildfire season was less extensive than past years (2.6 million acres burned compared to the decadal annual average of 7 million acres), it tragically marked the deadliest year in the last century with the Lahaina Fire causing over 100 deaths.
The rise in wildfire severity and size seen in recent years in the western U.S. is directly linked to climate change, with increases in fuel aridity (the drying out of trees and other flammable ecosystems) driving exponential increases in burn area . A warming climate increases the atmosphere’s demand for water. This, coupled with changing rainfall patterns contributes to drier and more flammable fuels, creating more favorable underlying conditions for ignition and spread.
Wildfire risk is especially high when dry fuels are combined with strong winds, spreading flames rapidly and making the fire difficult to control. The Camp (2018), Marshall (2021), and Lahaina (2023) fires were all influenced by very strong winds, which spread the fires from wildland sources into suburban communities, where they spread from structure to structure.
In collaboration with UCLA and UC Merced, Aon produced high resolution climate data to integrate into its Climate Risk Monitor tool, helping to quantify how wildfire and other climate perils may change in the future. The Canadian Forest Fire Weather Index (FWI) is a useful metric to estimate the role of changing weather and climate conditions on potential fire danger. Many of the most costly and deadly events in recent U.S. history have occurred under extreme FWI conditions.
Below shows the projected increase in days per year with extreme fire weather (FWI >50) in year 2050 under a moderate SSP2-4.5 emissions scenario, roughly equivalent to a 2.0°C global warming signal. The change is calculated in reference to a historical baseline period of 1995-2014. Western Texas, the front range of the Rockies, and parts of the interior West show significant increases in the frequency of extreme fire weather conditions in the future due to climate change.
Projected Change in Extreme Fire Weather Days in 2050
Significant loss events have increased focus on wildfire risk within the insurance industry, but uncertainty remains around its quantification. Several recent wildfires have caught the insurance industry off guard, with a growing number of events happening in geographies traditionally considered lower risk, like Lahaina (2023) and Gatlinburg (2015), and during periods outside of traditional wildfire season, like the Marshall Fire (2022). Prior to 2023, Hawaii had no wildfire events with notable insurance losses and, as a result, was out of scope for many hazard scoring tools and catastrophe models.
“The industry needs to adapt its understanding of how risk differs at the regional level, especially in the U.S. This is a key focus for Aon as we incorporate the findings from our research collaborations with UCLA and UC Merced into our analytics tools such as Climate Risk Monitor and Impact Forecasting’s forthcoming wildfire model to help clients understand how climate change may impact the risk.” – says Megan Hart, Global Head of Analytics and Collaborations, Aon’s Climate Risk Advisory.
"The industry needs to adapt its understanding of how risk differs at the regional level, especially in the U.S."
Megan Hart, Global Head of Analytics and Collaborations, Climate Risk Advisory, AON
The Rising Significance of Secondary Impacts
The direct damage affecting people and property driven by wildfire events is well documented, but organizations are increasingly waking up to the risks posed by secondary impacts on their workforce and operations. These indirect effects - such as extended periods of wildfire smoke post-event, can pose business disruption risk for a range of industries. For example, last year’s events in Canada were responsible for a downturn in solar energy production and widespread disruption to flights in the U.S. Northeast.
Secondary impacts also present significant health challenges. Tens of millions of people experienced the downstream effects of the Canadian wildfires as organizations grappled with how to address the health, wellbeing and financial challenges2 faced by their employees when heavy smoke created from the events traveled south, impacting several major U.S. cities.
Such occurrences raise key questions about how companies are expected to support their employees, specifically around flexible workplace policy, access to emergency medical supplies and home versus office resilience measures, such as air filtration/HVAC. In Oregon, California and Washington3, organizations now face legislation mandating an adequate response to wildfire-driven smoke.
"Organizations need to think beyond property damage within their risk management strategy and consider the total impact of climate hazards on their people."
- Patrick Kelly, Head of Climate Analytics for North America, Climate Risk Advisory, AON
Building Resilience to Address Increasing Wildfire Risk
Organizations need to understand where and how their wildfire risk could impact their people, assets and operations, alongside the communities in which they operate, before taking resilience-focused interventions.
From a human capital perspective, building chronic (slowly evolving changes in temperature and rainfall patterns such as heatwaves, drought and rising sea levels) and acute (infrequent, short-acting events like earthquakes and tornadoes) climate risks into workforce resilience strategy requires a holistic approach across HR policy (including health, safety and environment), benefits and disaster preparedness. Pre- and post-disaster event, organizations have a unique ability to positively influence both physical and mental health, as well as the financial well-being of their workforces.
Four Ways Companies Can Support their Workforce in the Wake of Wildfire
1. Communication and Training
Ensure there is effective, two-way communication on the topic of climate resilience. Give employees access to guidance and an ability to communicate problems to their employer (Employee Assistance Program).
2. Policy
Provide clear guidance on local leave policy before, during and after disaster events to support employee needs around caregiving and safety.
3. Benefits
Provide access to medical services and disaster relief schemes accounting for local exposure to acute and chronic climate risks.
4. Corporate Relief Funding
In the face of increased risk from climate events, and especially for operations located in areas of higher exposure, an organization’s approach to supporting their employees can be an important element of their employee value proposition and a key factor in talent attraction, retention and mobility.
Sources:
1 1. JT Abatzoglou, AP Williams, Impact of anthropogenic climate change on wildfire across western US forests. Proc Natl Acad Sci USA 113, 11770–11775 (2016).
2 Wildfires Pose Workplace Conundrum: Stay Home or Come to the Office?
3 Legislative lowdown: Wildfire smoke protections take effect in Washington State
4 https://www.e4erelief.org/
This article was originally published by AON. To read the original article, click here.
