The Insurance Dilemma Part 2: Defining Risk

In this second installment of our series “The Insurance Dilemma”, Living With Fire‘s Megan Kay (Program Manager) and Spencer Eusden (Curriculum Specialist) sit down with Frank Frievalt to explore different perspectives on wildfire risk. Frank is the Director of the WUI (Wildland Urban Interface) Institute at Cal Poly who previously worked as a firefighter and fire chief. He explains what risk means to fire practitioners versus the insurance industry, and how wildfire conflagrations are impacting firefighting and insurance.

For full episode details including the transcript, visit https://www.buzzsprout.com/admin/1819551/episodes/17835392-the-insurance-dilemma-part-2-defining-risk

When it comes to reducing wildfire risk, Frank talks about how fire scientists are looking at ways to slow down and disrupt fire spread in the three pathways seen in the WUI: vegetation to vegetation, vegetation to structure, and structure to structure. He then shares the factors that are leading to conflagration losses and how this has changed the realities for the insurance industry’s financial risk. He highlights the disconnect between insurance agencies and homeowners and shares that he and many others are working to figure out how to get the right data into the hands of the insurers to “reconcile actual risk on the ground [and] facts on the ground, with how we price risk transfer.”

Frank ends by sharing the top way homeowners can protect their homes: working together as a community to ensure that they and their neighbors have adequate defensible space and hardened homes.

Here are Frank’s tips for homeowners:

Follow the IBHS prepared home standards for home hardening and defensible space:

• https://wildfireprepared.org/wp-content/uploads/WFPH-Technical-Standard.pdf
• Reach out to your local fire agency if you have any questions.
• When looking at home insurance, work with your insurance agent and shop around if you feel stuck.

For more information about the WUI Institute and their current projects, visit

https://fire.calpoly.edu/

Watch Frank’s talk to the Santa Barbara County Fire Safe Council at:

https://www.youtube.com/watch?v=9_VyuwzJ5N0

Find Living With Fire’s Defensible Space and Wildfire Home Retrofit Guides at https://www.livingwithfire.org/resources/publications/

Transcript

Frank Frievalt: 0:00

Your goal is not actually to have insurance. Your goal is not to burn down your house or let your neighbor's house burn down your house. I mean, I want to have health care, but it's not so I can go home this afternoon and have a stroke and collect on that care.

Megan Kay: 0:16

This is the Living with Fire Podcast brought to you by the Living with Fire Program at the University of Nevada, Reno Extension.

Jenni Burr: 0:26

All right, everybody, welcome back to Living with Fire. I am Jenny Burr, and I am here with Megan Kay. And for this episode, Megan talked with Frank Frievalt. So Megan, tell us a little bit about what you discussed with And can you remind us what WUU is?

Megan Kay: 0:40

Thanks, Jenni. Yeah. So this episode, you know, we Frank. did last year, we did an episode all about wildfire insurance. We talked with the at the time, the Assistant Commissioner of the Nevada Division of Insurance, and we really wanted to kind of unpack some of the challenges that folks were facing, getting insurance and keeping insurance in Nevada, we invited Frank Frievalt on the podcast to talk about it more on the macro level, you know about what's going on in the nation with insurance companies and re insurance, and how that's impacting fire departments, and how fire departments and fire protection districts, what role they play in advocacy and just kind of engaging with both homeowners and insurance companies to try and close some knowledge gaps and data gaps when it comes to figuring out what is the wildfire risk and what does mitigation do to reduce that risk, right? So we talk about risk, and then we also our program, and many other programs talk about, we try to educate folks about things that you can do to reduce that risk. And what we're seeing is that people are still struggling to get insurance, or, you know, insurance companies are all kind of operating on their own, with their own risk models. And we're just noticing that there are definitely a lot of lot of gaps in knowledge, both on the insurance side and on the homeowner side. So Frank is the Yes, thank you. So WUI stands for wildland urban director of the WUI Institute at Cal Poly. interface. This is just referencing, you know, communities that are intermixed with natural vegetation, or at least kind of close to that. You know, embers can fly a couple miles ahead of fire. So it's not necessarily just the homes that are on the edge, you know, it could be one to three miles in from that zone, but a lot of times what that looks like is, especially in Reno and northern Nevada. It's not a hard line, you know, it's an intermix, and these communities tend to be at higher risk for wildfire. So Cal Poly in San Luis Obispo has a WUI Institute, and Frank is retired Fire Chief and is the Director of that Institute. And so he really kind of broke it down the issue and unpacked it for us. And really, after the interview, what really stuck with me, because I asked him, you know, not to give away spoilers, I still want you all to listen to the episode. There's a lot of great information in here, but there is sort of a little bit of truth that is hard to swallow, but mixed with hope, being that we do have power to reduce our risk and to, you know, help our communities be safer. And as individuals, we can take action, but we really need to work together as a community, because if we don't have this community wide mitigation, or fire adapted communities effort, it's not going to have as much of an impact on reducing our risk, especially when we have denser, more urban communities, like we saw in like LA and Altadena. That community, it was intermixed with natural vegetation, but the houses are pretty close, and you can do your defensible space, and you can kind of work on your home hardening, and that will definitely move the needle. But if we don't get everybody, or at least Frank was talking about, like 70% of the communities in these high risk areas, to start taking action, then we're not going to see the positive effects as much as as we could. So I really want people to take that to heart, and, you know, take some action and responsibility, and let's see if we can reduce our risk together and make our communities more fire adapted. So but yeah, that's our conversation with Frank, and hopefully you guys get a lot out of it, and we're going to be talking more about insurance, right?

Jenni Burr: 4:13

Yeah. So we're going to be talking with folks from the Nevada Division of Insurance, and we're going to delve into a little bit more about what's going on here in the state of Nevada, and also try to start to understand what do you do if you've had a fire and then you're trying to navigate the insurance process. So stay tuned for future episodes related to insurance. All right, without further ado, let's hear from Frank.

Frank Frievalt: 4:49

All right, good afternoon. My name is Frank Frievalt. I am the Director of the Wildland Urban Interface Fire Institute at San Luis Obispo Cal Poly. Been here a little over a year and previous to that, I am largely a fire practitioner. Have worked on one side of the Sierra Nevada to the other since 1979 at gosh, I guess it's special district, city, county, state and federal organizations.

Megan Kay: 5:14

I want to give you the opportunity to set the stage the way you want to set the stage. We were going to ask you know, if you could just describe your best understanding of what affects the wildfire risk, like, what goes into calculating wildfire risk to homes and buildings?

Spencer: 5:27

Yeah, and I think, just to clarify that would be as best as we like understand it the actual risk not how maybe insurance companies or actuaries calculate the risk, like, as best as we know what causes there to be a higher risk or lower risk for homes and that landscape view.

Frank Frievalt: 5:43

Now it's an excellent distinction that most people don't make, right? You've literally done your homework here. So when you're asking about, you know, I'm gonna say calculating risk. I think it's George Bell that came up with a statement, all models are wrong, some are helpful. And what he meant by that was, it didn't mean that, you know, don't ever use models. But the point was, you know, models are always approximation of reality that can be helpful in determining things that you know correlate can provide explanatory power. And so I want to be clear, when we're talking about calculating, we're really dealing in the realm of trying to figure out vulnerabilities, maybe probabilities, but I'd be less worried about the decimal points and more worried about the things that correlate a lot of complexity in this space. So I think the discussion really is, let's, let's talk about risk from really the two sides that we're trying to connect. So let's talk first about the wildfire risk on the ground from a fire practitioner standpoint, and then look at it from from the risk transfer side of it, of insurance and reinsurance. What really pulled me into this. It's almost embarrassing, but I don't think I really understood that things were changing in the wildfire space, truly changing until about 2015 I'm just I was just starting to see abnormal behavior that was becoming more and more regular out in the landscape. And we had had, you know, Oakland Hills, and we had had in the 60s, and some other times, we'd had some conflagrations associated with wildfire, but not on the regularity that we started to see since the camp fire.

Spencer: 7:17

Hey, everyone, this is Spencer. Just a quick vocab moment. We're going to use the word conflagration a lot today, and that means an extensive fire which destroys a great deal of land or property. I had to look it up, but now you know, so you don't have to look it up as well.

Frank Frievalt: 7:32

And so what started me down this road back about then I was working up at Mammoth Lake's Fire Protection District at the time, I had a property owner who passed our defensible space inspection early in the week, and before the week was over, they received a non renewal notice from their carrier for too much wildfire risk. Not surprisingly, they called me up, and I the supposed fire professional, could not answer this disconnect. And so it started me down the path of figuring out, how could we be interpreting risk, wildfire risk to homes so differently. That's really what started me down this road. So from the on the one hand, you know, kind of take it from a just a physics standpoint of heat transfer, and you let me know if I'm getting too nerdy here, but I think it's important.

Megan Kay: 8:22

Yeah, no, go for it.

Frank Frievalt: 8:23

So really, there's three domains that we have to deal with, fire spread. First one is fire period. Takes four things, heat, fuel, oxygen, chemical chain reaction, remove any of those fires out. But we have fire all the time that doesn't cause us problems. But a fire doesn't propagate where we don't want it. It's not a problem. We used fire since, you know, we figured out how to set things on fire. So the second domain is really about propagation and heat transfers, again, four ways, convection, conduction, radiation, direct flame contact. And you can, ideally, you can, you know, try to mitigate all four of those. But the ways that we we can look at mitigation packages, but what we're really talking about is hyper propagation. And so for hyper propagation within the wildfire landscape, we look for something called alignment, where you have fuel weather topography all properly aligned to go for hyper spread. These are when you get your big fire runs. You see these massive pyrocumulus clouds, means you have, you have alignment in those areas. So it's really three domains. I think it's 11 variables, and those are the those are the options to disrupt propagation.

Megan Kay: 9:39

I wanted to take a quick break to talk about the Living with Fire Program. Maybe you found this podcast and you're wondering, what is the Living with Fire Program? Well, we've been around since 1997 we're managed by the University of Nevada Reno extension, and we're really a collaborative effort amongst federal, state and local firefighting agencies as well as resource management agencies. Is to help people adapt, prepare and live more safely with wildfire. So if you haven't already, check out our website, livingwithfire.com where you'll find all of our resources and tools that will help you live more safely with wildfire. Okay, back to the show.

Spencer: 10:19

Can we just give the listeners an example of what like alignment could be? And so, like, the way I've heard it described is, like, let's say we have a valley with winds blowing up that valley, and there's a bunch of dense vegetation in there, and when you have those three conditions aligned, then you're going to get much faster spread. Is that how you would describe it as well?

Frank Frievalt: 10:40

Yes, for students, sometimes what I'll do to demonstrate is I'll take those banker boxes, you've seen those, so you find a garage, simply a big one with no smoke detectors, but you have no wind in it. So if you start a fire right in the middle of the box, it burns uniformly in a circle. If you tilt one edge of the box up just a little bit, you'll see that the burn pattern on that box lid is now oval, and it has a narrower base, and it opens up as it's going uphill. That's because the flames are actually bending over just a little bit radiant heats, preheating the fuels, and you have a natural upslope. So the first one is you have uniform fuel. Then all we did was add some slope, a valley to your standpoint, if you added more fuel, what I do is I draw a grid and put on about 100 toothpicks with the little, little plastic things. And if you again, if that's flat and you uniformly have the fuel, it'll burn in a circle. But if you have it flat and you put more toothpicks on one side and the other, the fire will behave as if it's going uphill, because it has more fuel in that direction. That brings in more more air on the backside, and it creates that. Now, if you tilt that up and you have more fuel, well, now you have two areas of alignment. You have fuel and topography. And then when you throw a wind in behind that, which is not uncommon during peak times, because even without a fire, you'll have an upslope wind. So when you have air and preheating fuels, and you have the topography, especially if it's sloped up, and you have high densities of fuel, and then throw some wind in behind that, those three factors will give you hyper propagation, or, you know, large fire runs.

Megan Kay: 12:17

I have a follow up to the hyper propagation idea. So, is this a new idea? Because you said this is kind of, you noticed a change since 2015 like, is this idea of all these factors being in alignment.

Frank Frievalt: 12:30

Alignment in terms of wildfire, has really been the same. What we're having to rethink here is that all the attention we're putting on this, this is just my opinion. I think it's shared by some others, but the, you know, the political interest, the financial calamity, all this attention, it's not really about wildfires. It's about conflagration, levels of life and property loss. I mean, I've been at this for quite a while. I didn't, haven't seen anything before the campfire, like the amount of level of effort, political interest, philanthropic, venture capital, government money going into this problem. We certainly haven't had the insurance problems, and we certainly haven't had the losses of property at the scale we have. And Jack Cohen writes about this as well, that we really don't have a WUI problem. We have a home ignition problem. And once you get into conflagration conditions, one of the factors is that the structures can become the dominant fuel type, not being a wildfire anymore. It's really, you know, a Dresden, you know, World War Two, fire bombing type conflagration, right? So part of what we're having to do now is de conflict, how we think about wildfire and how we think about conflagration. They're related, but, but once you make that transition, this is not a summer wildfire. And so in terms of the physics part of this, you know, we went into these different domains, different strategies we can bring to bear. And then also some colleagues and I are, we're envisioning the WUI burns as a system, and we feel like we need to mitigate it as a system. There will not be one single thing you do that actually resolves this. And so we've divided up this way about a half to a quarter mile outside of the WUI community and in we'll focus on the vegetation to vegetation fire pathway. This would be what you would think of as typical wildfire spread, right? So this is, you know, trees, grass, brush, etc. So that's one pathway. The second pathway is vegetation to structure, and this is more like a donut from the WUI community, about 100 feet out into the vegetative landscape that'll carry fire and then into the density of those structures, about two layers of homes where the density would carry fire. So think of this as a donut around the perimeter, and then within that is we're defining a WUI community as any collection of 100 or more structures where the average structure separation distance is less than 70 feet in 50% of the cases. Now that's a fancy way of saying the houses are close enough to be the primary propagation fuel from structure to structure, and that would be the structure to structure fire pathway. So, you know, if we're talking about the risk of fire propagating on the fire side, we're envisioning it as vegetation to vegetation, vegetation to structure, structure to structure, and in each of those, we have three domains and 11 variables to decide what to pull from to try to disrupt the fire spread. May not stop it, but how do we disrupt it? How do we slow it down? And the last part I'll put on that, before we talk about the risk on the insurance side, is you're going to start to hear this term of fast fires. If you really look at the most damaging losses of property and life typically going to happen within the first 12 to 24 hours. It's usually high winds, low humidities. May not be extraordinarily high temperatures following a period of desiccation where the fuel moisture is really, really low. And the reason those are so devastating, I mean, most, most wildfires are, unless you're up in the boreal forest or something like that, these are human caused fires. It's not unlikely there's a close proximity to the WUI community. And so when you have especially fine fuels, grasses, lighter types of brush, when you get ignitions under those conditions, which are optimized for hyper propagation, and you don't need necessarily to have a lot of topography there, because the wind speed makes up the difference. When you're talking about variables in fire modeling, I think wind is something like 7x it's weighted that much heavier than all the other types.

Megan Kay: 16:33

I mean, I've witnessed that firsthand in Reno we live in a valley, or it's like a bowl, basically, we're surrounded by mountains. And then once the air starts to cool down, you get these, like, down slope winds. Every single day, we're talking like 30 mile an hour downslope winds, and that's a daily occurrence. And then if you have a storm, which is when most of our fires have happened during like, cold fronts, you have like, 60 mile an hour downslope winds that are pushing fires downhill. So it's the opposite pattern. Is the one you just described, which is really wild.

Frank Frievalt: 17:05

Right? But it makes the point that the wind completely overpowers the topography.

Spencer: 17:10

Yeah. So I think one thing to try and connect some dots to things we talked about in the first episode, with the home hardening and defensible space with your donut three level analogy here. Do you mind just sharing how you might think about or how you might fit ideas of home hardening and or defensible space into each of those three layers?

Frank Frievalt: 17:33

Right. So in the vegetation to vegetation space, it used to be that for a long time, and I'm not throwing any stones here, right? If there are any shortcomings to the fire service and our approach to this, I have my fingerprints all over it. If I say anything that's counter to sort of legacy thinking on it, I'm guilty as charged, right? I've had to come to the conclusion that things have incrementally changed, which I can discuss when we're ready. But in vegetation to vegetation, we know that the embers will fly for, you know, miles, potentially under the right conditions. I mean, that's not all that common, but you can get very, very long range spotting, you know. But 100 yards is easy. And so, you know, if we're jumping things like, you know, eight lanes of traffic in LA, this idea of sort of Maginot Line Type, thinking about a fire break, at least in the conditions we're having now, doesn't really do much, and two problems with that, they're hard to maintain, and it's not uncommon to have the type conversion go to grass, which, if you don't keep up on it, then it's just just a faster problem of a fast buyer. So one of the things we're experimenting with right now is the idea of minimum time travel pathways. This is an embedded output from, gosh, I think it's flam map, and maybe also fire site, I don't recall, but essentially, we always think of the fire perimeters. Is this, you know, amoeba shaped. It's got a continuous edge on it. And unless you're on a really, really continuous fuel type, like just grass or very uniform brush, fire doesn't usually, especially under conflagration conditions, doesn't move with this smooth, sort of flaming front that you can, you know, drive along and just sort of put it out as you go. It'll have areas that will, that will move much faster, really kind of micro alignment for propagation. And what we realize is, if we're, if we're trying to stop conflagration, which is really property and life loss, where structures the primary fuel type, we need to slow down the fires the speed at which they're coming into communities, because you have a limited Response Force always and again, going back to Cohen's, I think it's six stages of kind of conflagration, disaster. It's not the right term. But you know, essentially, when you have more fire than you have suppression resources, you lose. The idea of trying to figure out, how do we slow fires down on these pathways is one thing that we're starting to experiment with, but we have to find a better way than what I call just standing fortress mindset. Fire breaks that we can't maintain anyway, and the embers go over so in the vegetation to vegetation is basically to answer your question. We're looking at ways to slow. The fire that could be disrupting it with different fuel types that don't burn as fast. Typically, you can. You can mechanically thin. You could prescribe fire. You can use some kind of type conversion. We're also experimenting right now with using retardants as a pre treatment, and see how many years you can get out of that. So that's in terms of disruption in the vegetation to vegetation space. We're thinking about those.

Jenni Burr: 20:25

Communities located in wildfire prone areas need to take extra measures to live safely. There are many ways to prepare communities and properties for wildfire, including creating and maintaining adequate defensible space and hardening homes to withstand wildfire. This could mean altering or replacing certain components of the home. Our wildfire home retrofit guide will help you better prepare your home and communities for wildfire. You can find the guide in the resources section of our website at livingwithfire.org.

Frank Frievalt: 20:58

I'm going to make the transition to risk from the risk transfer side. So one of the pieces of connected tissue is that we we have to make the value of mitigations visible to the risk transfer industry. Now this is the part where I'm sure I'll make some people squirm a little bit, and that's okay. That's okay. But wildfire as a peril, amongst all the other perils, it's always been a secondary peril compared to, you know, wind and water, hurricane, flooding, that type of stuff. You know, water is the big one that is really the most destructive. But wildfire was very consistent. It was understood in terms of losses that they could expect. And so that's been our history there. And so there wasn't a whole lot of need to understand all the details I just talked about. But three things have been accumulating as incremental changes that have tipped the scale to these configuration losses. That's an accumulation of fuels secondary to pretty aggressive suppression policies. Doesn't explain all of it. There are certain types, you know, the cycle for fire return intervals, some of them are just fine. So it's not all about that, but that's that's one. We do have a significant accumulation of fuels in some places, simply by way of suppression and unintended consequence. And now those policies popped up 1910, or so. The second one is that, especially since post World War Two, we've had an increase in development into fire dependent landscapes, and there's reasons for that. And the last one is, I'm no climate scientist, but as I've tried to study and become a student, one of the principals just leapt off the page to me, and it was this concept of vapor pressure deficit. You know very well from the Sierra Nevada mountains that as moisture comes in off the Pacific and it raises up an elevation, it precipitates cold air can't hold as much water, and consequently, then you get this rain shadow on your side. You know, that's why it's high desert. That's a micro version of this. So if you take two equal air masses, and one is warmer than the other, the warm air mass can hold more water and suspension before it precipitates out. When you do that at a global scale, it means that the baseline vapor pressure is different than it used to be, and it can hold more than it used to, which means plants in evapotranspiration are giving off more water as a standard issue than they used to, and I suspect eventually they'll adapt to that, but it's going too fast right now, and so vapor pressure deficit, development fire important landscapes and accumulation of fuels cost. Of fuels collectively have changed. What historically in our rear view mirror was a very predictable straight road.

Megan Kay: 23:28

Just quickly. So the vapor deficit that's just resulting in lower moisture content in plants, basically, they're evaporating their moisture. Part of it.

Frank Frievalt: 23:36

And this is where we're making the transition to the risk.

Megan Kay: 23:39

Yes, okay.

Frank Frievalt: 23:40

So what it really means is that the atmosphere can hold more water than it used to, which means when you go periods without rain, those periods can be longer, because the atmosphere can hold more before it precipitates out. Plus there's a baseline vapor pressure deficit that's happening all the time. It also means when it does rain or snow, it can rain or snow a lot, a lot more than we're used to. And so the one predictable thing we're seeing out of climate change is an increase in the frequency of extremes. So start to make that transition out of the risk transfer, folks. I'll start that where I just ended the other one. If our future weather is going to have more extremes from the insurance industry, when they underwrite policies, they have to hold back capital to be able to pay off, you know the normal claims that you're going to have, and they know how to calculate that very well, and the average annual loss, and they know there's occasionally these big things that happen, right? And the way you would have to hold on to a ton of capital to be, or you buy that down, or the insurers buy insurance, it's reinsurance, so they buy that down, and then that frees up some of the capital. And so if we're talking about that weather line again, you know these little blips that's within the individual company's capital, when you have the big ones, that's what you buy reinsurance for. Well, we're having a global increase in extreme weather the the cost to that is being transferred to the global reinsurance market. They're seeing losses they've never seen before at a global scale. The reason that's important when we talk about, go, do these mitigations. You know, do IBA says NIST we'll be wildfire prepared. We'll do all these things. Hey, where's my insurance coverage? I did all these things. Well, there's two challenges with that. Actually there's three. So one is it assumes that the current premiums are adequate to handle that. So in California, we had something called prop 103, back in the 70s, I think 80s, and it was a real it was a rollback of premium, and it has suppressed prices. Now that's good for property owners up to a point, but if it's too much of a disconnect between actual risk on the ground and calculated risk, then you have an unsustainable situation. I mean, a basic ratio they do is, you know, how much are you paying out and how much you taking in? And if you're putting out more than you're taking in on a regular basis, that's non sustainable. But a natural question people ask is, gosh, I was insured Monday. I'm going to be non insured when I renew. Let's say it's on Friday. The natural question is, gosh. Megan Spencer, what can I do? And frequently the answer people get are getting back is different versions of nothing. Doesn't matter. Part of the reason is that if you never really understood the loss sequence that I described in the first phase, if you don't understand the loss sequence, there's no way you can really have a value for a mitigation. You don't know what it does. So part of what we're doing here is trying to connect how we understand heat transfer and the propagation of these WUI configurations. How do we how do we disrupt those? We're doing it. We're talking about three fire pathways. How do we disrupt those? And now, if you understand how it occurs, how you can disrupt it, then the disruptions mitigations can become variables in the actuarial analysis of how much that reduces the vulnerability. Now it's almost like you're color blind, and now you can see but think about it for a minute. People have heard me say this, and I spent a lot of time in Nevada, so I use this example, Spencer. Let's Let's pretend you own. Is it still the MGM or is it something else now?

Spencer: 27:04

There's the Atlantis or the GSR.

Frank Frievalt: 27:06

Okay, we'll go with the Atlantis let's say you'll say you own the Atlantis. And I'm your floor manager, and I come in to you after a long weekend, I go Spencer bad news. We just lost a ton of money on, I don't know, pick your game of chance. We don't understand the odds, the probability of loss in this game anymore. What do you want to do?

Spencer: 27:26

Yeah, you've got to tighten up those odds and pay out less.

Frank Frievalt: 27:31

Yeah, I'm not sure the Gaming Commissioner will let you just you know. So the question is, oh, gosh, we don't know the game of chance anymore. Do you keep playing a game of chance you don't understand? Probably not a good idea. Okay, okay, great. That's prudence Spencer. I got it, although, if I look at our cash flow, I think we can only do that strategy so long, because we actually, you know, it's a significant revenue source, and it looks like Megan is still playing that game of chance across the street, so, you know, probably gonna lose the clients over there. So just sitting it out. And you saw this, right? You saw a complete withdraw from property insurance in California, so much so that the insurance commissioner said, Wait a minute, I'm going to put a moratorium on that, and you can't drop people, which you can only do for so long. Okay so we can't just stop playing the game of chance. Let's see. I know Spencer. Pick up the phone, call Megan. She's your competitor across the street. Tell her you no longer understand how to run the business such that you can compete with her. Can she help you out? That's probably not going to happen. And we have, and in all fairness, we have, understandably have antitrust laws and those types of things. So I mean, there's, there's structural things that actually keep that from happening. Okay so we can't keep playing. We can't call a competitor. Call a friend. Should we? We'll call the gaming Commissioner, tell them that we don't understand what's going on with our I don't know if anybody's ever done that. I'm not sure it would be taken well, but that still doesn't solve the problem. Do you tell the customers when they come in, if you publicly traded, or you have investors? Do you tell them? I mean, it's a tough spot to be in, right? Because this has been your, I mean, your your expertise is understanding risk, and now it's changed, and we don't know why yet, right? And so that's why there's this, you know, it's almost for a while. I know I had a local insurance carrier where I worked loft, and he could tell me what was going on. And, you know, he could, you know, this month, he could write over here, but not over here. And then a few months later, it flip flopped, and a few months later, after, couldn't write anything. And then a few months after that, everything opened up again. And we looked at each other and I said, well, has anything actually changed on the ground? Nope. So it kind of, it kind of helps understand this behavior. I mean, I don't think I could do it any differently. You know, it's just a tough spot to be in. But while I was working with the Western Fire Chiefs Association, I represented both Nevada and California, we'd had some of this go on with our ISO scoring Insurance Services Office, where, essentially they rate your structural firefighter ability to you know essentially put out what we think of as standard issue house fires, that kind of thing. And so I thought, You know what? And the fire service and the insurance industry have a tremendously long history. If you're not aware of it, go look it up. The contemporary Fire Service came from the insurance industry, and we're not a competitor, right? So we started a dialog. We have a shared interest. We don't want any losses of life or property. So how do you go about that? Well, you if it's an existing structure, you mitigate it. We realize it's not just the individual structure, but it's also the community.

Jenni Burr: 30:31

During a wildfire, firefighters have a lot to do. Make it easier for firefighters to defend your home by creating defensible space now. Defensible space is the area between a house and an oncoming wildfire where the vegetation has been managed to reduce the wildfire threat. Proper defensible space doesn't mean removing all vegetation, though, by following the lean, clean and green rule, you can keep your property safe while preserving its natural beauty. Check out our defensible space guide to learn more. You can find the guide in the resources section of our website at livingwithfire.org.

Frank Frievalt: 31:07

The idea on how do we figure out risk. We started this discussion with, what's the risk from the fire propagation side of the ground? We kind of covered that now understanding the risk financially, the transfer of risk, is what we're trying to. The WUI Institute is trying to connect the and it's not just me. I have some amazing colleagues and other people working on this. But the idea is, how do I take the best science about what's effective in disrupting the loss sequence and then making that visible in a way that the insurers can trust it and say, Okay, if these things are present, I know that risk now about this time in some of my other discussions, somebody raises their hand and they're just all upset at the insurance industry, you know, making money, and you know, there's almost this animosity. And I like to pause there and go, well, first of all, have any of you been a co signer on personal loan for anybody? There's usually not too many hands that go up, but if they do, then I ask, Was it a family member or someone you knew intimately? And if it's not, lower your hand, and there's usually no hands. And yet, that's exactly what we're doing here, is we're, you know, imagine somebody sending you 1000s of letters a day wanting you to underwrite a personal loan for them when you know nothing about them. And that's a little bit about what we're doing here, because what we're doing is by paying the insurance premium, they're taking on the risk that we have. And it used to be that they thought they had enough information to understand it, but those incremental changes I mentioned have made it unknown or certainly less known. And so they can't keep playing that game of chance. They've got to withdraw, but they can't withdraw forever. So it's, I mean, it's a real tough spot, right? So what we're trying to do is take the best science, make it visible at the actuarial level. I couldn't spell actuary a few years ago, and now they're one of my closest, both professional and personal colleagues. Nancy Watkins has been a real mentor for me. She works for Milliman of the San Francisco office, and so she provides this invaluable translation service between what we know to be factual on the ground, in terms of the physics of what happens, but we have no idea how to give certainty to that in the people that are underwriting this for both primary and reinsurance and so in a nutshell, that's what we're that's what we're doing in the middle, to try to connect all of that.

Spencer: 33:17

Frank, think you could just briefly define an actuary to the folks at home who aren't familiar with that?

Frank Frievalt: 33:23

Oh my gosh. No pressure here, right? Couldn't spell it a couple years ago. Now I'm going to define it for people. In the simplest terms. Actuaries help us understand if there's a value on something that we want to cover or recover over a period of time, what kind of financial contributions and set aside do we put to handle for a sporadic event? And it's not just on that one policy, it's on a whole body of policies. How do we put enough money aside to recover from an accidental event that does happen individually, it's hard to know. But the larger the group size, actually, the better you are at it. It is a real statistical assessment of how to prepare for future loss.

Megan Kay: 34:10

Where do they pull the data from then? So, like I'd imagine, for certain things, they have a huge pool of data and statistics. So in this case, where does it come from?

Frank Frievalt: 34:20

That is a great question. So right now, we lack the most important data that we need. There's a tendency by everybody, insurance, planners, academics doing original research, getting original data is hard work and it's expensive, and so again, I said in this case, it used to be very predictable. You didn't have to do anything to collect data because you knew the losses in your rear view mirror were so predictable, you almost didn't really need to know much else. And so whatever data you had was enough. I mean, to go study the data more than you needed, it's almost a kind of waste of resource. So one of the things I think we're struggling with right now is that we know from the conflagration loss sequence, a lot of the data that matters the most isn't actually available, and so to go get that kind of data at the least expensive, most efficient way, is currently a process of discovery right now. It has a heavy reliance on satellites because they're up in the air. That's pretty easy, but it's a lot of secondary and tertiary inference about well, this house is probably built at this time, and when that house was built, these features were common, and so we probably have these things in place. There's ways to crowdsource data collection. You just have to make sure that there can be quality assurance to it. It's got to be accurate. But I think we need to crowdsource the data collection at the parcel level, because I can tell you as being a fire chief trying to schedule that and then reschedule it again, and then the variation between one inspector to another and homeowner to another one. So I know there's at least one one service where we're using AI to interpret the video feed. That is, you know, it's choreographed for the for the person doing it. And it does two things. It will go and now turn that one is the AI is training to the IBHS wildfire prepared home standard, so it knows what characteristics to look for, and then find them. And then that translates into a data layer. And the data layer, we think should go to two places. One is to what we're working on is called the Data Commons, so that the insurance industry can pull out of it without feeling like they gave up, you know, proprietary information or trade secret. And the other side, we want to see go towards community wildfire protection plans, because that will help inform, at least in an ordinal level, what the conditions are on the ground. And that will help with both justification prioritization of mitigation dollars. Also helps first responders. You know, if I we send first responders into I'll call it nowhereville at 2am they've never seen it before. You know, just go to the big glow in the back of the sky, good luck. And they have no information. But if you could pull up a data layer that said, well, at least I understand the basics of what's happening on these parcels. You know, that's helpful. So in terms of data, that's part of what a lot of us are struggling with right now. What is the best way to get the most important data in a sustainable way that we have a high enough confidence level for someone to underwrite the risk?

Spencer: 37:00

So it seems like many of the these basically 50 year solutions of making this transition to be in a system of full construction and insurance and everything that goes into understanding and what could cause a loss to be there. It seems like, right now, many of the things you described are pretty like policy and work that actuaries and fire districts are doing, is there anything right now that kind of a listener homeowner can do to help, whether it's evolve or support this process?

Frank Frievalt: 37:37

One is the insurance crisis is a symptom. It's a symptom of a disconnect between risk and the pricing of risk, and the longer we somehow subsidize that, it just means that we guarantee the outcomes that we're currently not wanting. So at some point we have to reconcile actual risk on the ground, the facts on the ground, with how we price risk transfer. And think for a minute, what happens if we, if we can't transfer risk, because as the minute you get into any kind of lending, unless you're going to lend it and just take a risk every time, which isn't very sustainable, it means that we, I mean the cascading financial consequences. Let's just say, in the lending market for mortgages, you know, guarantee there's at least a podcast there. I think you're going to start to see a reconciliation between wildfire risk and uninsurability and general obligation municipal bonds. I think we're going to start to see a connection, because right now, those don't track very well, but we'd have a whole different outlook at the local government level if your credit rating went down, and if you think, if you think local government, credit ratings can't go down, just remember, the S&P just downgraded the entire insurance market. So the point trying to make here Spencer is that I would tell the homeowners your goal is not, actually to have insurance. Your goal is not to burn down your house or let your neighbor's house burn down your house. I mean, I want to have health care, but it's not so I can go home this afternoon and have a stroke and collect on that care, right? I need to be doing the things that are going to keep me healthy. And actually, if we all do the things that keep us healthy, the health insurance isn't very expensive, right? But if we, if we only look at the insurance having insurance policy, our hand is the end goal, we completely miss the dynamic of losing the structures now that we have these changed conditions. And then beyond that, I would tell them, please go look at the IBHS wildfire prepared home. If you're going to go for the designation, you have to do all the items on there. But you know what do what you can, if for nothing else, look at doing what you can. But in terms of getting that designation, it has to be all or none, and I I support that. But still, there's things that you can do that will drop your risk. And if you're not sure about that, local fire services at this point, I mean, Nevada is one of my project states, and I can tell you from working with the Nevada Fire Chiefs, they're engaged on this issue. If a homeowner calls up their local fire agency, I can tell you they are, they are working on this. Also check with your insurer. It does still pay to shop around. There's still, you know, as this transition processes, as the insurers start to get more aware of the value of relative things, because they don't make money by not writing policies. They might not lose money, but they certainly don't make money, not right? So they want to lean into this. Reach out to your local fire agency if you need help, and you have some really good ones there, and also work with your insurance agent if you feel like you're really stuck without anything. Shop around people are trying to figure it out on that side too.

Jenni Burr: 40:38

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Megan Kay: 40:56

That's great advice. My one, I guess, follow up to that would be, are there any particular I mean, the IBHS recommendation is great, but are there any like particular things that could signal to an insurance agent or actuary that the homeowner understands these mitigation practices

Frank Frievalt: 41:14

Right now, it's really hard because remember, the person you're dealing with, you know your underwriters and you know even a broker, they're really stuck with the rules of engagement that their corporate entity has set. And above that is, can they get reinsurance coverage, and what does that cost them? Because that pass through cost has to come. So one of the real tough spots is you may do all the mitigation and still have your rates go up, simply because the reinsurance portion is not picking up just wildfire. It's picking up global hurricane loss, sea level rise, convective storm, all these other things that are in extremis. So when you see a massive loss down in Texas, barrel, no wildfire problem there, but you know what? It's coming out of the same risk pool. Indirectly.

Spencer: 41:59

I'm just trying to think through distilling all of this. I think if someone asked me, like, if I go do all of my defensible space in home hardening my insurance rate, didn't recognize it. We could say like, Please continue to do those things because they're more likely to keep your home from burning, which is ultimately what you want from the insurance side of things, have changed a bunch in the last decade or more, so that our risks and losses are higher. We are still working to figure out the fine scale data of what actually affects those those risks and losses, so that the insurance companies and all the pieces in there can know how much they actually have to charge to cover the losses all the way through, from insurance companies to reinsurance, that's going to take some time to figure out, and then create all the policy pieces and relay on to what people, how we how we evolve In this new fire ecosystem that we're going to experience, that could be a 50 year transition, and then when we're there, we might be able to have fewer home losses, these great things like insurance reflecting work that you've actually done. How does that sound? Or are any holes or things I misrepresented there?

Frank Frievalt: 43:19

I think the challenge, and you're actually more articulate than I am, they go to screensaver on me pretty quickly, and it's understandable, right? People are trying to get to their jobs. They're trying to get kids to school. I mean, they've got, you know, they've got a lot of other things going on, and so committing to do extra work annually around your home to keep it fire safe, we you and me, have to figure out, how do we make that case in a real sense? Because having fire at your house is theoretical, uh, having to do the work is real. I don't know if you were going to put it in an investment standpoint. You know, a lot of us, if we have retirement accounts, 401k, something like that, you kind of just, you know, you put money into it, you trust it. You've got financial advisors, and you, you kind of can go on autopilot, right? But if you knew, if somebody came out and said, Hey, look, you know, if you're if you start to see retirement accounts go south, like the last recession, people start to plug in pretty quickly and realize, Okay, I gotta get my hands back on the wheel. I can't, I can't drive on autopilot here. I've got to engage. And I think my advice to people would be, if there was ever a time for you to spend more effort on protecting your home, it's now because this is not a pleasant idea, but because the fire and insurance officials are trying to figure out what we need to do to make you safe at scale, and we know the basics, but doing it at scale is the hard part, and so be more vigilant now than ever. You know, I don't know if you if the electric company said, I just want you to know electricity is traveling different than we ever thought. So what we thought was grounded and safe isn't, or is most of the time, or maybe not. Be really careful. You know, pay close attention to what you're doing. I mean, if you, if you share that with people, it probably you know, we have to find a way to say you need to be hyper vigilant during this period, because the normal systems that would just make recommendations and you could follow them and and go about your day, we're in a transition of what we thought we knew from a legacy standpoint, and we're having to create this new way to mitigate those so I would just say it's now more than ever that doing the things to protect your home during wildfire season, which is just about the whole year, some of my worst fires even there, you know those cold fronts in January, February, and then it snows right afterwards. So I know that's not very comforting, but you know part of us being effective, and you as educators, we have to be genuine, like, don't tell them it's a blue sky. If there's a tornado about to drop, this is not a blue sky. This is a pretty scary time.

Megan Kay: 45:51

Well, you've given me a little bit of, not a little bit, but you've given me confidence in my answer to folks when I'm out and about, what I get a lot is, you know, I did my mitigation, I got dropped. What's the point? You know, what's the point of doing this? A lot of people say that. They say, what's the point. And so, yeah, now I feel like my answer is going to be like, so your house doesn't burn down, because it's important. It's more important now than ever.

Frank Frievalt: 46:15

Right? Because if you don't have the insurance, I mean, is that a risk you want to take? No, there's ever to do it. It's when you're you know now you're underinsured or uninsured. The truth is, if we lost the insurance industry, insurance no longer existed, we would behave differently. You'd read about two or three stories where people lost everything, and you would, you would, you would do some additional work around the house.

Spencer: 46:38

So we're in a discovery phase, trying to understand what what do we need to focus on, and what are the key things we're figuring it out.

Frank Frievalt: 46:45

I think so I like to think of it as a transition phase. Yeah, that. I mean, we're going from a place we understood to a place we haven't arrived at yet. We just know that it's going to be different. And so I can tell you firsthand, nobody has this all figured out right now, or they would be insanely rich and monopolizing the market. So I think, yeah, that's a good way to word it Spencer is that it's discovery. I'm gonna call it transition, because I it's not like we're sort of blindly going in and we're into the wilderness, discovering things. We actually have some structure in it. And so we're transitioning from the way we used to do it kind of legacy thinking into what's going to work in a future that, you know. And this is a little depressing, but I'll, I'll say it is that, you know, reading through the science of some of our best and brightest, when we look at the science in there, our planning assumptions are in the very near future. And I don't think we're 10 years away from it. It's, you know, could start tomorrow, but we'll hit a period of about five decades where our average annual acreage loss in the western US will be 250% of 2020 that is, that is a that is a future we can't imagine. So there's a clock ticking there on how to get these mitigations, because if the longer we wait, the worse the conditions are going to be that we're going to try to get these done under, I feel like nationally, probably globally, but certainly nationally, we're going through a grieving process. We all had an idea. I did up until 2015 of what the future probably looks like, and it's not what I imagine. And I think we're grieving that loss. And if you think about was it Kubler Ross, I think, you know, denial, anger, bargaining, depression, finally, acceptance. I think we have to work our way through that. And so I would end the podcast on the idea that I think we can do this. We've shown an ability to do it. We just have to understand this is a long term process, and we have to commit to it, and we've always admired evolution and adaptation. We look backwards in history. We just think that's great. We marvel at it. Well, it's our turn to evolve. It doesn't look so fun now that we're in the middle of, you know, survival of the fittest. And how do we adapt to this new, changing environment? But it's our turn to adapt. I think we can do this. We just have to get past the denial.

Megan Kay: 49:01

Thank you for listening to the Living with Fire Podcast. You can find more stories and resources about wildfire at our website, livingwithfire.com the Living with Fire Program is funded by the Bureau of Land Management, the Nevada Division of Forestry and the US Forest Service. And we're managed by the University of Nevada, Reno extension, an equal opportunity institution.