Wildfires in rapidly growing western states continue to be a big problem for homeowners and a challenge for insurance companies, according to a report released Thursday morning by real estate industry researcher CoreLogic.
The "2013 CoreLogic Wildfire Hazard Risk Report" identifies more than 1.2 million residential properties across 13 states in the Western U.S. currently at high or very high risk for wildfire damage. These properties represent a combined total property value estimated at more than $189 billion.
Of the properties identified, more than 268,000 homes fall into the "very high risk" category, with total residential exposure valued at more than $41 billion.
"Understanding the level of risk and potential exposure to wildfire damage at the local level is particularly important not only for homeowners, but for insurers, lenders and servicers, investors, disaster response teams and many others," the CoreLogic report said.
The impact on the insurance industry has been significant. The CoreLogic report notes that the Black Forest fire that hit in Colorado in June has led to more than 3,600 insurance claims for total damages of $292 million.
That fire came a year after a pair of costly fires that erupted in Colorado in June 2012. One of those, the High Park Fire, resulted in nearly 1,300 insurance claims estimated at $113.7 million. Another one, the Waldo Canyon Fire, resulted in more than 6,600 insurance claims totaling an estimated $453.7 million.
One reason for the uptick in insurance claims is that more residential neighborhoods are being built in or near wildland areas that are most vulnerable to wildfires.
Between 2000 and 2010, 10 million new homes were built in wildland-urban interface areas in which residences either border or are built on land prone to wildfires, according to an August report from Reuters.
This trend has put more pressure on property and casualty insurers to rethink the way they handle homeowner's insurance policies. In some cases, they have enacted stricter rules for homes at high risk of wildfires.
Much of the responsibility for insuring homes falls on companies that specialize in property and casualty insurance. In the U.S., the biggest publicly traded names in this sector include Allstate (ALL), Travelers Cos. (TRV), Progressive (PGR), Chubb (CB) and Ace (ACE) .
This year's fires haven't been as frequent or destructive as those that hit in 2012, when droughts across much of the West led to a record number of fires and unprecedented damage.
Still, the CoreLogic report says, "drought conditions that reached unprecedented levels last year are still plaguing many of the western and plains states and are forecasted to persist into late fall.
This year's major fires include the ongoing Rim Fire in California's Sierra Nevada region, which has burned more than 257,000 acres and has been described as the third largest fire in California history. According to reports, the fire is 95% contained and should be fully contained by the end of the month.
The Southern Rockies and South Central U.S. contain the most homes facing wildfire risk, the CoreLogic report says. More than 145,000 properties in this region are identified as very high risk.
The states with the most properties at risk are Colorado, California and Texas. "Including the homes located in the High Risk category, the total property exposure to risk reaches more than $160 billion for these three states," CoreLogic says.
Seven cities were analyzed in the report. Of those, Los Angeles has the most single-family residences exposed to wildfire risk, with more than 60,000 properties in the high or very high risk categories. The total value of the homes in those two categories is estimated to be nearly $8.3 billion.
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