20241017PAC to Staff 97-2 Attachment - EIM Final Status Update Wildfire Coverage for Utilities in 2024.pdf

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ENERGY
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Status Update : Wildfire Coverage for
Utilities in 2024

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Overview
Mutuals areSub limits are What are the
Wildfires are Wildfires are sub limitingcreating Wildfire
becoming more becoming more wildfire coveragecoverage gaps inalternatives to
prevalent destructive to manageexcess liabilityface this
exposuretowers in 2024problem?
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U . S .A. Wildfire Statistics
Annual Number of Wildfires Nationally State Significant Fires
80,000 Source:Sit/109 California 83
Averages Washington 43
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60,000 Texas 32
Co
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LO 00
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Idaho 27
L Lo Ln
40,000 LO Oklahoma 25
Colorado 22
20,000 New Mexico 17
Arizona 15
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No �,� �� �� do �,� J� �� Nebraska 15
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Florida 9
• From 2018 — 2022, 27 states experienced significant wildfires that resulted in death or serious injury of at least one person or caused property damage.
• The number of U.S wildfires in 2022 was higher than the 5- and 10- year averages.
https://www.earthdata.nasa.gov/topics/human-dimensions/natural-hazards/wildfires
https://www.iii.org/fact-statistic/facts-staxtistics-wildfires
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AEGIS 2024 Wildfire Outlook
• AEGIS is revising their excess liability rating model to include a wildfire charge
for ALL states, for ALL members. 2023 Approximate AEGIS Wildfire Load
(Electric Utilities)
• AEGIS will no longer disclose the specific wildfire load and it will instead be built
$50,000 - $100,000 (states/jurisdictions
into the overall rating going forward.
east of the Mississippi in drought conditions)
• The previously communicated 2024 trend increase of 8% - 10% has been • $350,000 lower wildfire risk
adjusted to a baseline of +12.5% on average. • $500,000 moderate wildfire risk
• However, the embedded wildfire charge could "increase significantly" based on • $750,000 higher moderate wildfire risk
individual exposure and loss experience. • $1,000,000 high wildfire risk
• Up to $1,750,000 extreme wildfire risk
• The increase is the result of loss activity, specifically wildfires, and their concern
for deficiency in wildfire premium across the book.
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EIM 2024 Wildfire Outlook
EIM Wildfire Capacity
• EIM is reducing their wildfire limit
to a maximum $25M for 14 Max Limit
Western States and $50M for all $50,000,000
other States (including gas utilities
and those with renewable
exposure) 'd $25,000,000
• California remains excluded
• Lower limits could be deployed
based on specific account exposure
and loss experience
• Premiums will increase '~
significantly to try and fund losses
• Potential exists for EIM exclude
wildfire cover in 2025
• EIM will reassess 2025 capacity
deployment based on 2024 '~
experience (including wildfire
specific premium income and
wildfire loss activity)
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Sample Impact of 2024 EIM Wildfire Sublimit Changes
Example Excess Casualty Tower , Wildfire Coverage (Pre-Drop) , Wildfire Coverage (Post-Drop)
I I
$200M I $200M I $160M
Commercial Market$10MM I Commercial Market$10MM Commercial
1 I
Commercial Market$15MM I IF $15MM Wildfire GAP I Commercial Markets'
2023 (Excludes Wildfire) 1 Commercial 1
Commercial Market I attachment point
Commercial Market$40MM markets was$110M
Commercial Market$40MM dropped down
to fill WF gap
I $25MM Wildfire GAP I
I I
EIM$100MM EIM$75MM I �
I I
(WF sublimit$75MM) 1 EIM$75MM
I I
� I I
AEGIS$35MM i AEGIS$35MM i AEGIS$35MM
I I
I I
I I
I I
I I
$200M I $200M I $160M
CommercialI Commercial I Commercial
2024 Commercial Market$15MM I $15MM Wildfire GAP i Wildfire coverage gaps in
(Excludes Wildfire) I I Commercial excess liability program
ICommercial Market$40MMCommercial Market I
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.0 I I
$75M xs$60M I $50MM Wildfire GAP PROBLEM
WF gap to be
f$75MM Wildfire GAP
, filled vs.$25M xs , Commercial Markets are
EIM$100MM i $110M in 2023 i struggling to drop to a
(WF sublimit$25MM) I I EIM$25MM $60M WF attachment point
EIM$25MM
AEGIS$35MM
AEGIS$35MM 1 AEGIS$35MM
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I I
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Considerations to Fill the Wildfire Gap
Buy more limit from AEGIS- up to $50M Buy stand alone wildfire coverage
- Could be a costly option based on limited credit from EIM to - High rate per million based on limited commercial market
attach higher
- Markets participating in stand-alone wildfire cover want to
- The extra $15M of capacity from AEGIS likely to have a higher maximize returns for the deployment of capacity
price per million compared to EIM; however, the additional
wildfire capacity is nowhere else to be obtained at this - Potential Pricing: $50,000 - $200,000 per million
attachment point in a traditional risk transfer arrangement - Current markets include: QBE, Berkshire Hathaway, Ascot,
- Potential pricing for extra $15M: 25% - 60% of underlying Aesir, Vantage, MAP, ArchRe, Arcadian UK, Allianz, etc.
AEGIS $35M premium
Pay additional premium for the high excess to drop down lower Alternative options
in placement for wildfire only
- Evaluate swing premiums and pre-established loss load options
- Potential Pricing: TBD based on actual wildfire exposure and (payment of additional premium only if a loss occurs) to avoid
appetite of market to drop down (several will have $100M a rate on line approach
min. attachment point). Market applying a rate on line for their
layer if high hazard exposure - Captive Utilization: Co-participation, fronting reinsurance, etc.
- If Cedar Hamilton sits immediately excess of EIM with large - McGriff is working with independent wholesale partners and
limit deployed, it may require altering of tower as Cedar key domestic partners to create potential wildfire specific
Hamilton is typically scaling their wildfire limit to match EIM's facility
deployed limit
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ENERGY

Wildfire Modeling and Analytics
Understand your Wildfire Risk Mitigate your Wildfire Risk Risk Management Resources
(Prescient, Stout, Jensen Hughes, (Technosylva, Jensen Hughes)
CoreLogic, Reax Engineering) •
What tools are available to you to manage a 0 Jensen Hughes
Do you have a wildfire assessment report of potential loss? (https://www.mensenhughes.com
your service territory? • Forecasting wildfire risks days in advance 0 Stout (https://www.stout.com/en
• Ranking of wildfire exposure by exposure • Monitor wildfire risk in real-time utilizing 0 CoreLogic (https://www.coreIogic.com
tier and location current weather conditions during red flag
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• Considers historical wind, drought, warnings • •
elevation, vegetation, 3rd party property • On demand prediction of spread and impact
values, etc. of an actual wildfire and proactive planning Transmission0 Prescient
stems
• Establishes a framework for understanding for "what if" scenarios (htt• • _ •
the likelihood of a wildfire occurringand the ' " Engineering
Prioritizing asset hardening plans and _ _
consequence of that wildfire vegetation management based on model (htt• •
• Potential Pricing: $40k - $150k (depending predictions for impact
on scope/time of report) • Wildfire evacuation planning and analysis
• Timing: 2 — 6 months (depending on depth
of report)
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ENERGY

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