Beyond Prediction: Wildfire Mitigation That Works

Pete [01:53]: Pat, to set the stage, please tell us why you started Green Shield Risk Solutions and maybe a bit about why you saw an opportunity where many insurers are retreating from the wildfire prone areas.

Pat Blandford [02:06]: Well, Pete, that’s a great question. And I’m often asked that, you know, I think there was a part of me that loves solving difficult problems and, and I’ve always just been fascinated with catastrophe insurance. So prior to starting Green Shield, I was at a company called Tokyo Marine Highland, which among other things was the largest writer of private flood in the country. And so I was, I was not new to extreme weather. I was not new to catastrophic risk.

And one of the things that I continue to see, and we saw several years ago when we were starting Green Shield, was the kind of more and more of the country being exposed to extreme weather. And what we saw was kind of the admitted markets, the traditional markets were more and more concerned with the ability to model the risk. And did they feel like they were getting rate adequacy? So I think that’s really, you know, kind of what piqued our attention was the feeling like the models were somewhat immature, feeling like the models were probably not really accurately reflecting the level of risk.

I think what we saw more than anything, though, was nowhere in the equation was the focus on mitigation. So when you think about classically insurance, you think about prediction, prevention and risk transfer. And we saw enormous amounts of effort going to prediction and lots of scoring models.

We just didn’t see much in the way of prevention. And ultimately, that’s what we wanted to do with Green Shield. And at Green Shield, what you will see is it is a combination of analytics and capacity. how can we bring analytics that are really focused on how can we make properties insurable? How can we make them better risks and then package that with capacity? That ultimately was and remains the vision for Green Shield.

Pete [04:00]: So, your Property Guardian analytics platform, it seems like when I was doing research, it’s central to how you kind of approach wildfire risk. Can you tell us a little bit more about the value it delivers and how it also is helping other insurance entities and stakeholders to enhance resiliency?

Pat Blandford [04:18]: So, at Green Shield, we actually have two operating companies. So we have Property Guardian Solutions, which is our analytics and mitigation platform. And then we have Green Shield Risk Solutions, which is a property focused MGA. And Property Guardian underpins everything that we do. So whether or not it’s purely, when we’re providing this to other insurance carriers, reinsurers and brokers, or if it’s powering or an MGA, either way, we center everything that we do around our analytics platform.

Today, Property Guardian is pretty exclusively for wildfire risk. And in the years ahead, I suspect you’ll see us move into severe convective storm, flood, and hurricane. But today, you should probably think of us as having what we think are the most robust wildfire analytics in the market. And again, I think when we looked at the landscape, you know, around wildfire exposure, we realized that it’s, you know, it’s not just the homeowners market, although that’s where you see most of the headlines and the attention, but builders risk and commercial property. You know, really anywhere there’s where there is property exposure, you know, for sure in the Western U.S., although I think we’re seeing it far more than just the Western U.S., but a need for deeper analytics. And what we found was many of the existing models just focus on the propensity for fire. and they’ll look at a community or a region and they will develop a score or a probabilistic kind of model that focuses on what is the likelihood of a fire happening in this area within the next year. To some extent, we just felt like that was insufficient. And so, yes, our models do the same. So, yes, we can absolutely score and do probabilities around a community or a region. But we really focus on mitigation and how can we make sure that

We’re giving our insureds, we’re giving our clients the most information that we can. And so we also break down any risk that we look at, not only the community and the region, but also the structure and the parcel. So we’re looking at defensible space. We’re looking at roofing materials. We’re looking at kind of the vegetation. we use very current vegetation in our models and our analysis. And what we’re trying to get to is if a fire comes through this area. Can this property be defended and what mitigation should they do now at the point of bind that will actually make a difference? And I think we’re unique in that approach.

Pete [06:51]: So, Pat, I’m just curious, what form of communication does that take? In other words, with a customer? Do you give them a picture or do you show them a simulation or how do you do that?

Pat Blandford [07:03]: Yeah, so it depends on what level of analytics they’re looking for, but I’ll look at most of our clients. Most of our clients look for an executive report on each location. And not to bore you with the details, but that’s a 22-page report. And so we break down in quite a bit of detail the attributes of the structure, the attributes of the property, community, the region. So we’re looking at historical burn scars. We’re looking at ember fallout zones.

And then the, you know, a really important part, and I think we are very unique in the insurance industry, is we actually do propagation modeling. And so we will simulate over a hundred wildfires in that region using 20 years of historical weather data. So we take over 7,000 days worth of historical weather and we’re looking at, you know, temperature and wind direction, wind speed probably more than anything else. And we simulate a fire in that area. And this is where, you know, kind of really having current vegetation models matter. This is where defensible space makes a big difference. This is where we can model structure to structure impact. And so the report that we deliver is, you know, you should be thinking about all these characteristics of this risk that you’re potentially going to write. but we’re also going to take that a step further and we’re going to simulate if a fire comes through this community, this is exactly what could happen.

Pete [08:29]: That’s impressive. I find people often it helps to illuminate a product if they talk about a success story. Could you tell us about a success story, a real-world example where property guardians significantly improved resilience or prevented a catastrophic loss?

Pat Blandford [08:53]: Well, you know, unfortunately, yes, I can. I know when I say unfortunately, it’s tragic what happened in Los Angeles earlier this year. And you think about the loss of life, you think about all the loss of value and the way that impacted people. But yes, our property guardian clients, I think we’re happy that they had decided to partner with us. And so we had a builder’s risk carrier that came to us last June and they were looking at taking on a project in the Pacific Palisades and they commissioned us to do a report on the area and in our report we highlighted a couple of things but we highlighted the amount of vegetation and that if this area was impacted by a Santa Ana wind event because of the building density it would be very difficult for a fire to stop in that area. Effectively we said both with ember fallout and the fire coming through, the damage would go all the way to the ocean. That prediction turned out to be spot on, but we spelled out some mitigation and some defensible space and building type issues that they needed to focus as a part of their project, which they agreed to and adhered to, and the structure survived the wildfire.

So they were actually not damaged in the Pacific Palisades event. you there was another example. So we have a product called Overwatch. And in Overwatch, we monitor every active wildfire in the U.S. And again, we have current vegetation and then we do what’s called spread forecasting. So we model out in 12 hour increments going all the way out to 14 days where the fire is likely to spread. And if you were to go on our LinkedIn profile you would have seen that on the day that Pacific Palisades fire started, we put out a GIF that highlighted where we expected the fire to expand to over the next 14 days and that forecast proved to be highly accurate. And so we had Overwatch clients that were coming to us and asking us about their portfolio and saying, hey, how much of our current portfolio is at risk? And we were able to tell them very precisely what we thought was at risk and what wasn’t.

A lot of the existing tools in the industry just take a kind of a five mile radius or just a five mile buffer, in which case it’s not really a level of precision that’s going to enable you to accurately predict where your losses are.

Pete [11:23]: Yeah. So, we saw that Green Shield recently partnered with a company called Technosylva, I believe, if I’m saying that correctly, for predicting real-time fire behavior. Can you tell us a little more about that solution and how it helps you simulate an insured risk profile?

Pat Blandford [11:42]: Yes, I love the feature because it is a core part of what we’re doing and we think is relatively novel in the insurance industry. So Technosylva has been around for decades. It’s a terrific company. They were originally based in Spain, but they provide propagation modeling. So they do wildfire simulations and they were really built for two industries. So one is the fire service. And so if you think about how Cal Fire positions their defense. So when Cal Fire is thinking about where do they send engines, how do they think about air defense and how do they combat wildfire, they use the propagation modeling from Technosylva. So that’s actually how we got introduced to them because our head of wildfire mitigation spent 15 years in the fire service and knew of Technosylva through that program.

They also work with the utility industry. they’re helping the utility industry thinking about where are they exposed and where should they be shutting down power in cases of extreme risk. We were the first group to work with Technosylva in the insurance industry. And so we co-developed a kind of using their propagation modeling, but in a use case that could be tailored very specifically to insurable risk and how to think about the simulation. So it’s been a terrific partnership.

Pete [13:05]: So, wildfires becoming more difficult for a lot of insurers. We don’t need to look very far in industry news to see that. So how does Green Shield make this all work? it technology? Is it the experience of your people? Or what gives you confidence in your products?

Pat Blandford [13:23]: Yeah, it’s an absolutely super question. And I would tell you, it is a combination of both. And one of the things that I love is when you think about the Green Shield team, we are insurance folks that are employing some pretty sophisticated technology. We are not technologists that are trying to learn the insurance business. And so it is that combination of, you know, both myself, our head of underwriting, our head of distribution, our head of operations, the core team have all spent their entire career in the insurance industry, and specifically within property insurance. We have coupled that with a very deep team of wildfire-focused experts, risk mitigation, and catastrophe management folks. So our head of product comes out of Guy Carpenter where he was building out Guy Carpenter’s property analytics suite. As I’ve mentioned, our head of wildfire mitigation was in the fire service. Actually, every single one of the people in our wildfire team all have similar backgrounds, so they all come out of the fire service having been boots on the ground fighting wildfire. And we’ve essentially said over the last few years, help us design the best mitigation platform, help us design the best system that we can to understand wildfire risk, wildfire exposure, and then how do we develop insurance products around that.

Pete [14:47]: You know, one of the themes kind of in this podcast, when I talk to folks has been challenges in convincing property owners and insurers or carriers to invest proactively in risk mitigation. Have you seen any of those and what have you learned?

Pat Blandford [15:05]: Yeah, I mean, absolutely. And I do think that insurability is becoming kind of the number one issue when you think about, you know, homes in California, and it’s certainly bigger than a California problem. So we would tell you, you know, this is significant in, you know, Colorado, Arizona, Utah, Montana, Oregon, Washington, pretty much the entire Western US. People are starting to come to grips with, hey, the legacy models probably weren’t pricing this in. We need to think about this and therefore insurability is becoming the absolute number one issue when you think about real estate transactions, when you think about home ownership.

And so, again, I hate to benefit from anybody else’s tragedy, but what happened in Los Angeles earlier this year put a spotlight on this issue. And I think more and more carriers, more and more reinsurers, more and more homeowners are starting to understand that wildfire exposure is real and mitigation and home hardening are important. They need to be incorporated into the solution. And I think more than anything, that’s what we try and get to, which is we’re fundamentally looking for the property owner to co-underwrite this risk with us. We want them to invest in risk mitigation. We want them to invest in home hardening and property hardening. And those really have to be a part of the solution. And I would say all of the Property Guardian clients, which are insurance companies, they all embrace that. So anybody who is a property guardian client kind of embraces that philosophy.

Pete [16:48]: I’ve been to Arizona a bunch, Pat, and I’ve seen the tankers fly over, you know, and I’m like, and you’ve seen property rates go up pretty significantly. And so I agree insurability certainly is, an issue. in a vision, you mentioned you work with individual customers. It seems like community focus mitigation also has an impact. So can you share how Green Shield engages with communities to manage wildfire risk and to help, help secure coverage.

Pat Blandford [17:18]: Absolutely, and you know I would say this is an area that we are still evolving. I think there are a number of communities that recognize they have a significant issue and I can’t tell you how many HOAs I’ve spoken to where they say, hey we just got our renewal or we were non-cancelled and our new rate, you know it’s not that it’s going up 10 % or 15%, it’s going up 500%, it’s going up a 1,000%. It’s order of magnitude change and so unfortunately that is the reason why they’re focused on it. We can and do provide communities with a very sophisticated set of analytics to show them where targeted mitigation will help. So, as an example, we did a project for a large community that kind of blends into Nevada and California and we went through in exhaustive detail, all of the insured value across hexagons. We overlaid it with hundreds of thousands of hexagons, which were less than 200 meters in width. And then we looked at the TIB and the risk level in those areas and we highlighted, this is where mitigation is really gonna make a difference. This is where you should be deploying assets. This is where you should be putting your dollars. We haven’t yet combined that with significant capacity and that’s kind of the next evolution. And part of that is, no carrier or reinsurer wants a concentrated risk. And so when you think about a community and so they’re saying, hey, we’ve got deep exposure up, you you’d love to be able to package that with capacity. And where we have to get to is then how do you still accomplish, you know, kind of a spread of risk. But we’ve certainly started with analytics and really helping communities understand how and where they should employ mitigation.

Pete [19:11]: So, you mentioned a little earlier that your analytics underpins a lot of what you do and that the first sort of instance, if you will, is wildfire risk. Can you talk to us, like, do you have plans to, you mentioned it, can we just double click on that a little? Do you have plans to offer this type of approach, a more proactive approach to other hazards?

Pat Blandford [19:33]: We do. You know, sometimes it’s also helpful to talk about what you’re not going to do. And so, you when I think about the, you know, kind of the cat models that have been around in the industry and, you know, several of them have been around for decades, you know, we are not trying to build another cat model. And so when I look at the cat models around hurricane and flood, I feel like they are very mature, you know, kind of good models. I think that severe convective storm and wildfire, probably a little further away in terms of level of maturity and accuracy. What our approach does that is very different than those cat models is really blending in the mitigation, really thinking about how can you make this structure, how can you make this parcel better, how can you make this area insurable. And we absolutely are going to take that same approach around severe convective storm, around flood, around hurricane. So absolutely a part of the Property Guardian roadmap.

Pete [20:34]: Let me just go back on the Los Angeles wildfires, because you talked a little bit about that and you told us a little bit how your customers made out. Are there any other lessons that you could have for folks listening to this podcast around those wildfires or things that you saw specifically that Green Shield was exposed to?

Pat Blandford [20:58]: if there was one issue that I heard repeatedly was that it was a quote, black swan event that, you know, people felt like they didn’t really understand they had that risk. And that’s the part that, you know, fundamentally I disagree with. I don’t feel like this was a black swan event. If you looked at our models, our models would have told you that, you know, kind of both the areas of the Eaton fire and the Palisades fire were high risk. And

You know, yes, it was a difficult Santa Ana event that hit, but it wasn’t a one in a 100-year wind event. It was probably a one in 15 or one in 20-year wind event. Happened to come in a year where there was far less precipitation than usual. And so it definitely had the conditions were right for a significant event, but it should not have come as a surprise to the industry. And I think that’s the overarching point, which is the tools and the data that are available today are a world of difference from where they were even five and 10 years ago. And so there are data, there are tools, there are analytics that can really help people understand their risk in a way that I think historically they’ve kind of checked the box around, hey, did we check, did we see what the models tell us? I think in this day and age with the amount of exposure, think it develops or deserves a deeper look.

Pete [22:24]: So, Pat, beyond increases in the platform, if you just think about mitigation in general, like, what do you think the future holds? Like, where do you think that effort is going?

Pat Blandford [22:39]: Well, hopefully you see it in building codes. I certainly think that we’ve seen that kind of in the Florida market over the years. And so when you think about the building codes and the changes in Florida over the last 15 and 20 years, you see very stringent building codes. And frankly, most of those structures are surviving the hurricanes. That doesn’t mean that they won’t have loss, but you’re not getting, if you’ve got a FORTIFIED roof, an IBHS certified FORTIFIED roof, to be able to withstand a very significant wind event. so the losses, know, essentially when the roof stays intact, the losses tend to be very manageable. When you lose the roof, you’re going to lose everything. And I think what’s becoming understood is severe convective storm, wildfire, it’s somewhat of a similar story, which is, you how do we think about making sure the roof, making sure the exposure points, the windows are, you know, kind of resistant to the extreme events?

And ultimately, I think you have to get that through building codes to enforce that. And hopefully, we will continue to see that.

Pete [23:45]: It takes a lot of people to make sure that resiliency is in place. Who else needs to be involved?

Pat Blandford [23:53]: I think the other thing that I would like to highlight and obviously I think most of the people listening to this are going to be coming from the insurance world. This is more than just an insurance issue. So you folks in the real estate industry, mortgage lenders, property owners, risk managers.  I think that the understanding your property risk, understanding your exposure, embracing the concepts of mitigation, embracing the concepts of home hardening or property hardening need to be understood by everybody in the value chain.

I think the brokers need to be involved. And so I think the more understanding the brokers have around what’s driving exposure, what’s driving rate decisions, what’s driving cancellation decisions, the more they can advise their clients on what’s realistic and what needs to be done as a part of the solution. Again, from our perspective, the property owner and the insurance carrier need to be aligned on the risk and managing that risk. And the more informed the broker is, I think the more helpful the broker can be in accomplishing that.

Pete [25:04]: Well, Pat, thank you very much. learned a lot. I appreciate certainly your time and your efforts. can certainly see that you’re using analytics and your expertise and insurance to make the world a better and safer place. So I’m very grateful for that. Thank you very much.

Pat Blandford [25:20]: Thank you, I appreciate you having me.