Climate change intensifies wildfire risks, impacting workforce safety – Aon

Climate change intensifies wildfire risks, impacting workforce safety – Aon | Insurance Business America

Catastrophe & Flood

Climate change intensifies wildfire risks, impacting workforce safety – Aon

Disaster preparedness urged to protect employees from rising threats

Catastrophe & Flood

By
Kenneth Araullo

As climate change intensifies wildfire risks, organizations are increasingly focused on protecting their workforce before and after such events, according to insights from Aon.

In North America, there has been at least one wildfire loss event exceeding $1 billion in eight of the last 10 years, a stark increase compared to the previous 50 years, where only five such events occurred.

According to the report, although the 2023 US wildfire season was less severe in terms of area burned, with 2.6 million acres affected compared to the decadal average of 7 million acres, the year tragically marked the deadliest wildfire in the last century. The Lahaina Fire resulted in over 100 deaths.

Aon’s analysis shows that the increasing severity and size of wildfires in the western US is directly linked to climate change. As temperatures rise, fuel aridity — the drying out of trees and other flammable ecosystems — increases, contributing to larger burn areas. A warming climate, combined with shifting rainfall patterns, creates the conditions necessary for larger and more frequent wildfires.

The risk of wildfire is heightened when dry fuels combine with strong winds. Fires such as the Camp (2018), Marshall (2021), and Lahaina (2023) incidents were exacerbated by strong winds, which helped spread flames rapidly into suburban areas.

In collaboration with UCLA and UC Merced, Aon has integrated high-resolution climate data into its Climate Risk Monitor tool to assess how wildfire risks may evolve in the future. For example, the Canadian Forest Fire Weather Index (FWI) is used to estimate how changing weather and climate conditions affect potential fire danger.

Aon’s projections indicate a significant increase in the number of days with extreme fire weather (FWI >50) by 2050, particularly in western Texas, the Rockies, and parts of the interior West. These changes are calculated using a moderate emissions scenario (SSP2-4.5), roughly equivalent to a 2.0°C rise in global temperatures.

Uncertainty in risk assessment

Significant wildfire events in recent years have drawn attention to the insurance industry’s difficulty in accurately quantifying wildfire risk. According to Aon, several wildfires have occurred in regions traditionally considered low-risk, including Lahaina (2023) and Gatlinburg (2015), as well as during periods outside traditional wildfire seasons, such as the Marshall Fire (2022).

Prior to 2023, Hawaii had not experienced any wildfire events with notable insurance losses, making it a region overlooked by many hazard models.

Megan Hart (pictured above), global head of analytics and collaborations at Aon’s climate risk advisory, emphasized the need for the industry to adapt its understanding of wildfire risk at a regional level.

“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,” Hart said.

Secondary impacts

While the direct damage from wildfires is well understood, organizations are beginning to recognize the secondary impacts these events can have on their workforce and operations. These include business disruption from extended periods of wildfire smoke, which can affect various industries. For instance, Canada’s wildfires last year contributed to a downturn in solar energy production and disrupted flights in the US Northeast.

Secondary impacts can also pose significant health risks. Tens of millions of people across the US were affected by the downstream effects of Canadian wildfires, raising questions about how organizations should address employee health, safety, and wellbeing in the aftermath.

Companies may need to implement policies such as flexible work schedules, access to emergency medical supplies, and enhanced building resilience measures, including air filtration systems.

Aon notes that in states like Oregon, California, and Washington, companies are now required by law to provide adequate responses to wildfire-driven smoke, reflecting a broader trend of regulation aimed at mitigating secondary wildfire impacts on workers.

Resilience against wildfires

To prepare for the increasing wildfire risks driven by climate change, organizations must assess how these events might impact their people, assets, and operations. Aon highlights that companies should integrate both chronic risks (such as gradually changing temperatures and rainfall patterns) and acute risks (such as rare, sudden events like wildfires) into their workforce resilience strategies.

From a human capital perspective, building climate risks into workforce policies requires a comprehensive approach across health and safety, benefits, and disaster preparedness.

Organizations have the ability to positively influence their employees’ physical and mental health, as well as their financial stability, both before and after a disaster.

Aon outlines several strategies companies can use to support their workforce in the wake of a wildfire, including clear communication channels, disaster preparedness policies, and employee benefits that account for local exposure to climate risks.

Additionally, companies might consider establishing corporate disaster relief programs to assist employees with emergency financial support during wildfire events. According to E4E Relief, 57% of US employees are unable to cover an emergency expense of $1,000, making such programs critical.

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