Wildland fires are on the rise in the U.S. According to the National Interagency Fire Center, 2015 saw more than 68,000 wildfires burn over 10 million acres. The U.S. Forest Service reports that 2015 was also the most expensive wildfire season on record, costing $1.71 billion for the year. This total surpasses the previous record of $1.67 billion set in 2002. A total of 4,636 structures were destroyed by wildfires in 2015, including more than 2,600 homes and more than 100 commercial buildings.
Why are wildfire losses increasing?
“Changing weather patterns, increasing populations, flammable vegetation, and structures within reach of a wildfire’s flames and embers are increasing exposure to wildfire losses,” says Pat Durland of Stone Creek Fire LLC, Boise, Idaho. “With warmer summers, less rain, and milder winters, periods of seasonal fire conditions are increasing,” adds Durland. According to data compiled by the Union of Concerned Scientists from Federal Wildland Fire Occurrence Data(1) , and other published sources, the number of large wildfires in the Western U.S. has increased from approximately 140 annually in the years between 1980–1989, to 160 annually from 1990–1999, to 240 annually from 2000–2012. That’s nearly a doubling of large fires annually in those three decades. The length of the wildfire season in the West has also increased significantly from the early 1970s to today—increasing from an average of 5 months to an average of 7 months each year.
Hotter average annual temperatures are considered a key factor—snow packs melt earlier, forests and lands are drier for longer periods contributing to the ignition and spreading of wildfires.(2) As reported by the New York Times, David A. Robinson, a climatologist at Rutgers University who tracks snow cover, said that the April 2016 snow pack in the Northern Hemisphere was the lowest since records began half a century ago.(3)
Forest wildfire, temperature and the timing of spring snowmelt
In a recent scholarly article published by The Royal Society, Anthony LeRoy Westerling reports on significant research into the correlation of wildfire, temperature patterns and the timing of spring snowmelt. Westerling states that in forestland areas managed by the US Forest Service, the National Park Service and the Bureau of Indian Affairs, (which combined, includes some 70% of forest area in the western U.S.) annual large wildfire frequency is significantly correlated with spring and summer temperature. The years with more frequent large fires occur in years with warm spring and summer temperatures and early spring snowmelt dates. Fire seasons in 2003–2012 averaged more than 84 days longer than in 1973–1982, reflecting a trend (of increased length) of just over three days per year since the 1970s. Over the last four decades, the average large wildfire burn time grew from nearly six days in1973–1982, to nearly 20 days in 1983–1992, nearly 37 days in 1993–2002 and over 50 days in 2003–2012.(4)
Wildfires and the risks to populated areas
In the United States, the wildfire threat has traditionally been thought of as a “western problem” says Stone Creek’s Pat Durland, affecting the drier western states such as California, and Colorado. “Shifting weather patterns have expanded the wildfire threat in many parts of our continent,” adds Durland.
Dr. Charles Nyce, Asst. Professor of of Risk Management & Insurance at Florida State University, speaking at Loss Control Forum 2016, cites the fact that people are migrating into wildfire areas. He also noted that we are seeing more wildfire in non-traditional areas such as New Jersey and Maine.
According to Bill Gabbert, former Fire Management Officer with the National Park Service and publisher of the WildfireToday website, “The wildland-urban interface is growing. More people are living and recreating where previously there was less human activity.” says Gabbert.(5)
In May, 2016, the New York Times reported on the massive fire and related disruption and losses in Fort McMurray, Alberta, Canada: “The near-destruction of a Canadian city by a fire that sent almost 90,000 people fleeing for their lives is grim proof that the threat to the vast stands of spruce and other resinous trees, collectively known as the boreal forest, is real. And scientists say a large-scale loss of the forest could have profound consequences for efforts to limit the damage from climate change.”(6)
The article makes the point that Fort McMurray, in northern Alberta, was “particularly vulnerable as one of the largest human outposts in the boreal forest.” But, as the report continues, “the destruction of patches of this forest by fire, as well as invasions by insects surviving warmer winters, has occurred throughout the hemisphere.”
A Snapshot of Fort McMurray Losses
- Losses could reach $9.4 billion ($7.3 billion US)
- 80,000 people had to flee
- 8,000 evacuees needed to be airlifted
- 1,600+ buildings damaged
- 1 billion gallons of oil production lost daily
- 40% of entire oil sands output interrupted
Mitigating Risks and Losses
With a long-term trend toward warmer and drier springs and summers, earlier melting of annual snow packs in high-elevation areas, and continual migration of populations and accompanying residential and commercial development in areas once considered remote, the upward trend of occurrences of large wildfires appears likely to continue. But there are science-based ways to significantly decrease this risk and the related, life-threatening and enormously costly outcomes. The mitigation of wildfire risk through proven Loss Control measures is the subject of the accompanying article “Reducing Wildfire Risk.”
- Union of Concerned Scientists – http://www.ucsusa.org/global_warming/science_and_impacts/impacts/infographic-wildfires-climate-change.html#.WB3cwhIrLNA )
- Justin Gillis and Henry Fountain, NY Times, May 10, 2016 http://www.nytimes.com/2016/05/11/science/global-warming-cited-as-wildfires-increase-in-fragile-boreal-forest.html?_r=0
- Increasing western US forest wildfire activity: sensitivity to changes in the timing of spring. Anthony LeRoyWesterling Published 23 May 2016.DOI: 1098/rstb.2015.0178, The Royal Society Publishing, http://rstb.royalsocietypublishing.org/content/371/1696/20150178
- Justin Gillis and Henry Fountain, op. cit.
By Pete Chart, Alexander & Schmidt, with Pat Durland of Stone Creek Fire
Pat Durland has been in the business of wildland fire management for over 30 years. He began as a wildland firefighter and smokejumper and literally knows wildfire from the ground up. Since 2004, Pat’s company, Stone Creek Fire LLC, of Boise, Idaho, has been sharing proven wildfire loss reduction strategies and tactics with agencies, communities and insurance companies facing these preventable losses. Pat plays a national role in planning, training and implementing wildfire mitigation principles that reduce these potential tragedies and damages by fighting wildfire losses “smarter, rather than harder.” What concerns him today is the unnecessary damage wildfires are having on people and communities around the world.
I recently had the opportunity to meet with Pat to talk with him about the wildfire threat, and how we can effectively reduce losses through proper wildfire Loss Control measures.
How is wildfire different than other perils, like tornadoes, hurricanes, floods and other natural catastrophes?
The difference is dramatic. Wildfires are not simply a weather event. They require heat to initiate and sustain combustion. By identifying and managing flammable “fuels” before a fire event, we can determine and design areas where fires are less likely to occur and spread. Unlike a tornado or hurricane, we can control the behavior of fires in localized areas.
Unfortunately, these occurrences are erroneously described as ‘luck.’ The fact is, wildfire damages and losses are preventable. We have the ability to understand and initiate proven Loss Control solutions.
What is wildfire mitigation and why do it?
Wildfire mitigation is the identification of available fuels and managing them to effectively eliminate landscape and adjacent structure ignitions. These controls are often 1) affordable 2) easy to accomplish, and 3) effective in improving a property’s ability to resist ignition from the flames and embers of wildfires. When reducing wildfire losses, little things, like keeping leaves and litter off roofs, make big differences.
What are some of the specific measures a business owner can take to mitigate their wildfire risk?
It’s important to learn how wildfires ignite structures. It’s not the big flames, but windborne embers and small surface fires that contact structures and cause most ignitions. Similar to physical inspections for interior fire safety, electrical hazards and other risks, wildfire hazards are easily observed, identified and resolved. Nothing is more important than on-site hazard observation by a trained inspector.
An effective inspection starts with the structure and works out 100-200 feet. It’s not about the fuels that are distant from the structure, it’s about how well the structure will resist firebrand ignitions, and if fuels will lead surface fire to a structure. This is why physical on-site inspections out-preform analytical information. If a structure is found vulnerable to ignition from wildfire, it is also at risk for more-probable external ignitions, such as smoking, fireworks, arson, or other causes.
It is important to harden structures against ember attacks with ignition-resistant roofs and to screen structural openings to prevent ember entry. The structure and the surrounding 5-foot area are critical. Also important are managing and maintaining landscapes near structures with plants, mulches, hardscapes that are resistant to ignition and won’t propagate surface fire or ignite from embers.
How effective are modern wildfire mitigation practices?
Modern scientific research and recent findings indicate that, of all the natural perils we face in today’s world, wildfire losses are among the easiest to predict and prevent. Just as we have made our structures resistant to internal ignitions, continued wildfire loss is a ‘solvable’ problem. We should be able to dramatically diminish this risk for future generations. As I like to say, we can’t change the path of a tornado or hurricane, but we can change the path of a wildfire!
Drones for commercial and recreational use are becoming increasingly popular today. In this article, we will discuss types of drones, the marketplace for drones, current and proposed regulations, potential risks posed by drone operations, and some solutions.
In April of 2014, when a triathlon in Australia hired a local drone operator to take aerial photographs of their event, competition organizers never expected serious injuries from the UAV. But before long, one of the event’s triathletes was in a nearby hospital, claiming head injuries caused by a drone. Soon, the athlete, the organizers and the cinematographer were arguing over whether or not the drone actually caused the injury—and importantly—who’s responsible when commercial drones hurt people (Fast Company, 2014).
According to the Washington Post, in 2015, a Cessna pilot reported a drone cruising at 1,500 feet in highly restricted airspace over the nation’s capital, forcing the U.S. military to scramble fighter jets as a precaution. In Chicago, United Airlines Flight 970 reported seeing a drone pass by at an altitude of 3,500 feet.
As recently as April 17th of 2016, a British Airways jet heading from Geneva to London was apparently hit by a drone. The plane landed safely at Heathrow Airport. Pilots have reported a surge in close calls with drones: estimated at over 700 incidents in 2015, according to FAA statistics, about triple the number recorded for all of 2014. The agency has acknowledged growing concern about the problem and its inability to do much to tame it* (Washington Post)
Drone incidents causing disruption, conflict and even arrests are occurring in our own backyards.
In 2014, a 32-year- old man was arrested after the police said he shot down his neighbor’s drone in Lower Township, N.J., when it flew over his yard. He was indicted on felony charges and could face 10 years in prison. (From a January 2016 New York Times story)
What is a drone?
According to the Federal Aviation Administration (FAA), a drone is defined as:
- A component of an Unmanned Aerial System (UAS)
- “A device used or intended to be used for flight in the air that has no onboard pilot.”
- Most commonly used name for an Unmanned Aerial Vehicle (UAV)
What is the current drone marketplace?
In 2015, the estimated cost for all approved platforms was over $10.7M. About 1,018 out of the 1,480 total platforms were manufactured by DJI and worth just over $2M. The U.S. led the way with platform sales over $3.6M for 256 platforms. Canada was just behind the U.S. with platform sales at over $2.5M, with only 35 types of platforms. Prior to last year, data on commercial UAS operations was nonexistent.
What types of drones are in use today?
There are basically two types of drones in use:
Rotary wing – a flying machine that uses lift generated by blades that revolve around a mast, like a helicopter (90% of drones).
Fixed wing – a vehicle capable of flights using wings that generate lift caused by the vehicle’s forward airspeed, like commercial airliners (10% of drones). Radio-controlled hobby aircraft are not considered to be drones and are not within the scope of drone requirements.
What are the current requirements for drone use?
The FAA regulates the National Air Space (NAS) are has regulations currently in effect. They
- No person may operate UAVs in the NAS w/o specific authority
- There are different types of authority based on type of user
- Drones may be operated no closer than 5 mi. to airports, air traffic
- There is a model airplane exemption
- Formal pilot training (with license) is required
What new requirements for drone use are being considered by the FAA?
The FAA Proposed Rule is still under review and it applies to small (<55 lbs.) UAVs. The following rules have been proposed for drone use:
- Drone flights are limited to:
- Altitudes <500’ above ground level
- Visual Line of Sight (VLOS) only
- Daylight only operations
- 5 mi. from airports/aircraft
- 3 nm from stadiums
- No overflights of crowds
- Max. speed – 100 mph
There are also some requirements being considered in this rule. There is must be a “pre-flight inspection” of the drone by the operator. While the requirement to have a pilot’s license will be dropped, drone operators must be a “knowledge test, and have a “certificate issued”. In addition, operators must retake the knowledge test every two years. Also important, there is a requirement for the marking of UAVs (similar to other aircraft) with unique identification.
What are the risks posed by drones?
One of the largest concerns with drone usage, as evidenced in the reports above, is interference with commercial airline traffic, in spite of current rules, there have been multiple instances of drones coming too close to planes, particularly during landing/takeoff.
Drones crashing into crowds (overflights are NOT permitted) are a serious concern. Last year, a drone also crashed on the White House lawn, and a shoe- box-sized drone crashed into empty seats and broke apart at a second-round match at the US Open, temporarily halting the tennis tournament.
I made a presentation on Drone Safety at the 2015 Regional ASSE conference on Cape Cod last November. I had a good-sized audience, and one participant had actually been hit by a drone. A company safety director came up to me afterward and mentioned their company had hired a local photographer to take a group photo outside their building. He indicated a drone was used to fly over the gathered employees (again, not allowed under the current rules).
There are definitely privacy concerns with drones, as the story above about the neighbor spying on the 16-year-old sunbather by the pool illustrates.
There are risks from operators losing control of their drones, and also losing the drones from a insured property standpoint. Some new drone models have a built in sensor to return to the operator if they are running out of battery life (average flight time for a drone is 25 minutes). A similar feature allows the drone to “return to home” if it is nearing the outermost part of its range.
There are also concerns that the controls of the drone could be hacked, and someone else could take control of the drone. Related to this, there are terrorism risks should drones be used to deliver a chemical weapon or some other attack on civilian and/or military targets. If a power source other than batteries are used, such as fuel cells, there are potential risks posed in the refueling process.
What are some solutions to risks posed by drones?
Certainly the proposed rules by the FAA, when adopted, will address some of these issues. Commercial insurance for drone operations and the physical drone itself have recently come onto the market. New voluntary standards and also additional research into drone operations should help to prevent injuries and property damage from drones as these mature.
Law firms are now working a both ends of the spectrum of dealing with claims that are coming from drone activity in personal coverages.
One online ad for a law firm seeking plaintiffs says “Drone invasion of privacy laws create a right to bring a civil action against the individual who unlawfully intrudes into your privacy. These kinds of drone spying lawsuits can also be considered intrusion of solitude claims. Depending on your set of case facts, you may be able to recover punitive damages.”
While another law firm, focused on insurance coverage and defense, says: “We predict that – in the near term – insurers will see a significant increase in recreational UAS operators seeking coverage under existing homeowners’ insurance policies. Insurers of UAS operators should familiarize themselves with their policy’s exclusions and see if their policies include an exception from the definition of “aircraft” for any model or hobby machines that fly. They should also evaluate their exclusion for commercial operations and intentional torts – to see if they apply to their insureds’ UAS operations.”
Clearly, staying on top of the changing regulatory environment, as well as evaluating coverages and policies that may in any way relate to the operation of drones, will be essential for both insurers and insureds.
The Emergence Of The Sharing Economy In The Business-To-Business Sector
The so-called “triumph of access over ownership” that is defining and driving the new Sharing Economy is also the underlying force bringing new economic models, not just to lodging and rides, but to a wide array of business-to- business (B2B) sectors, as well. Coupled with new mobile technologies, cloud computing, and growing comfort with approaches to validating reputation and trust, the disruption that has been synonymous with brands like AirBnB and Uber has launched a parallel movement in areas such as temporary office space, just-in- time delivery of construction equipment, and many aspects of supply chain management.
Much has been written about the insurance risks associated with consumers using private homes and vehicles in ways not previously envisioned. Less discussion is apparent, however, about risks involved when companies, government agencies, and nonprofits pioneer new business models designed to put underutilized assets to work, or create access for people, services and opportunities outside of their traditional operations.
The technological innovation and business transformation shaping a new global economy, be it called “collaborative consumption,” “the sharing economy,” or “anything-just- in-time,” are moving so quickly and are now so pervasive, that it is worth looking a what some insightful companies and business experts have written in the past year or two, to set the stage for what lies ahead.
What follows is a brief, annotated list of articles and papers that we found helpful in “catching up” on the economic movement that’s sweeping us all into new territory.
(Excerpt) Around the world, a new wave of peer-to- peer, access-driven businesses is shaking up established categories. Whether borrowing goods, renting homes, or serving up micro-skills in exchange for access or money, consumers are showing a robust appetite for the sharing-based economy. We set out to explore how the sharing ethos will make its mark on the wider market—and to understand what incumbents and challengers must do to position themselves ahead of disruption and capitalize on new sources of revenue. By unlocking the sharing economy today, can companies transform today’s threat into tomorrow’s opportunity?
Sharing has, of course, been around forever—and many industries offer alternatives to ownership. But as a model, the sharing economy is distinguished by these core pillars:
- Digital platforms that connect spare capacity and demand
- Transactions that offer access over ownership
- More collaborative forms of consumption
- Branded experiences that drive emotional connection
- Understanding an economy built on trust
- Rethinking value exchange
- The push for less friction
(Excerpt) The sharing economy represents an outstanding opportunity for insurers to forge closer relationships with their customers and connect with a wider base of prospects. In addition, it is forcing insurers to rethink all aspects of their business including product design, pricing, risk assessment and channel strategies. Insurers that are first-movers in this arena are likely to become powerful market leaders in the sharing economy. Given the rapid and likely long-term expansion of this market, this should provide an excellent opportunity to drive profitability and growth.
(Excerpt) While the peer-to- peer market is growing, there are many headwinds that could derail this powerful economic force. Regulatory requirements will become more rigorous as the segment matures. Additionally, insurers’ wariness of the sub-contractor structure and the high liability risk makes these businesses particularly vulnerable. One lawsuit could wipe out a company before it gets off the ground. With limited access to insurance markets, these firms need to find alternative risk transfer vehicles.
(Excerpt) The sharing economy offers opportunities for emerging markets, megacities, and the rising middle class, but we need more collaboration across sectors—and the impact investment community. To date, the vast majority of activity in the sharing economy has focused on the private sector: startups, private investment, and questions around what it means for big business. However, there is an equally significant set of opportunities for the public and social sectors. This is a conversation that has yet to surface in a meaningful way, and until it does, our understanding of the sharing economy is incomplete.
(Excerpt) The vast differences in the types of sharing economy platforms can be mind- boggling, from pure sharing services with no money changing hands to commercial services and everything in between. Policymakers often assume that the concept of the sharing economy applies only to ridesharing (or ridehailing) and homesharing, and are typically unaware of the wide array of goods and services that can be shared, which range from food and other consumables to an individual’s time and tools. Municipalities, for example, can even share heavy equipment, reducing overall expenditures and providing needed tools that might otherwise have been unavailable.
The best-known sharing-economy companies do business in ride sharing (BlaBlaCar, Didi Kuaidi, Lyft, Uber, and Yandex.Taxi, for example) or in room sharing (Airbnb, Couchsurfing, onefinestay, 9flats). But in other areas too, companies have succeeded by identifying market inefficiencies and transferring control over transactions to consumers. They include shop and office sharing (We Are Pop Up), meal sharing (EatWith, Meal Sharing, Traveling Spoon)—and even clothes sharing (Yerdle) and solar-energy sharing (Yeloha). In all cases, the common threads are disintermediation, the sharing of excess capacity, and increased productivity—as well as commercial challenges, on an unprecedented scale, for incumbent operators such as taxi firms, hotels, restaurants, and utilities. Not everyone is happy, however. More broadly, regulators and governments have started to question the long-term impact of the sharing-economy business model on incumbents and communities.
(Excerpt) Honeycomb 3.0 was a large undertaking. At least 460 startups were reviewed, and 280 were chosen to be included in Honeycomb 3.0. We specifically focused more on international startups, startups that are on the upswing, and those receiving a lot of funding. The goal was to take a current snapshot of the “A-list” companies in the space.
This process led to uncovering new trends in the sharing economy and establishing new categories, subcategories, and some re-organization of previously established categories. There were also some startups from previous Honeycomb versions that no longer exist or had been cannibalized, so they were removed.