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Record claims losses loom as California blazes

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Australia has lessons to learn from this week’s devastating California bushfires, which have already caused losses estimated at more than $8 billion.

Bushfire and Natural Hazards Co-operative Research Centre CEO Richard Thornton says the California fire events are not a precursor to what will happen in Australia during a summer expected to be hot and dry, but there are nevertheless lessons to learn.

The Camp Fire northeast of San Francisco has wiped out the northern town of Paradise in Butte County, and is officially the state’s most destructive and deadly blaze, with at least 48 killed, dozens more missing and 8800 structures destroyed.

Another blaze further south, the Woolsey Fire, has killed at least three people and damaged beach resorts including Malibu, while a third, the Hill Fire, ripped through Ventura County, north of Los Angeles.

A briefing released by AM Best says all-year fire seasons are now “the new normal” for California, forcing insurers to re-assess and re-price their exposures.

“Urbanisation and growing population density in heavily wooded areas, as well as hotter, drier conditions resulting from rising temperatures and declining precipitation, are contributing to wildfires becoming an increasingly frequent peril for insurers and citizens of California,” the briefing says.

“As this year has progressed, so have the wildfires that continue to engulf numerous areas of the state.”

AM Best says loss figures are not yet available, but this year will set new records.

Losses from the Carr Fire earlier this year are expected to hit $US2 billion ($2.78 billion), and Moody’s estimates losses of up to $US6 billion ($8.31 billion) from the present fires.

“The potential for historic losses was already likely before the Woolsey Fire ripped through the wealthier area of Malibu, which has a median home value of approximately $US2.9 million ($4.02 million),” AM Best says.

The number of acres burned this year is already nearly double last year’s total – which was itself a bad year. Last year’s losses hit $US16 billion ($22.16 billion).

Mr Thornton agrees the expansion of Australia’s major cities into forested areas “is happening here, just like in California”.

“We need to change where people live, and how they live,” he told insuranceNEWS.com.au.

The centre’s bushfire outlook, released earlier this year, shows that many areas face above normal fire risk this year, particularly along the drought-affected east coast.

“It will be a challenging season,” Dr Thornton says. “The demographic issues are just as bad here as they are in the US, and in many ways we have dodged a bullet in the past.

“Even Black Saturday in 2009 could have been so much worse. We have certainly not seen the worst possible outcome yet.”