Insuring Southeast Asian commercial forests: Fire risk analysis and the potential for use of data in risk pricing and reduction of forest fire risk
The author uses his own data gleaned from over 10 years of commercial forestry insurance across the world to propose that despite a low intrinsic fire risk across most of Southeast Asia, especially Indonesia, commercial fire losses are unacceptably high, and could be reduced substantially within the current financial legal and political framework within which forestry companies operate.Opening with a statement about the dearth of forest fire loss data in the commercial sector, it is observed that the consequent inability of general insurers to estimate the rate of fire loss leads to very low insurance participation in forestry within Indonesia. A summary is then provided of the financial and environmental benefits of insurance participation in commercial forestry were this situation to be changed.A short discussion on risk perceptions is introduced to make the point that without reliable commercial forest fire loss data, risk perceptions of fire exposure in Southeast Asia by the financial sector, including insurers, is a barrier to risk transfer and investment. While real fire risk and perceived fire risk for Indonesia seem at present to be in agreement, the paper challenges that this should the case.Comparisons are made with different parts of the world with the knowledge that, in commercial terms, plantations in the low latitudes behave similarly everywhere in terms of fire causes, fire propagation factors, and characteristics of plantation or managed mixed forest fires. A review of the fire sizes within commercial forests is a good indicator of the efficiency of fire management strategies, and profiles from a high fire risk territory and Indonesia are compared.Using commercial and unidentified data the author then demonstrates that commercial growers in Indonesia have a high annual rate of forest fire loss and may also have a significant catastrophe fire exposure. This ‘cat’ exposure is far greater than for equivalent plantations in clearly higher fire risk environments. These conclusions are and should be discussed with forestry companies to change attitude and investment levels.Practical points for improved plantation fire management are made along with comments about the resources required. A parallel discussion then reviews fire risk assessment and management by the insurers to prevent their own ‘forest fire’ losses if they are to get further involved with the provision of Indonesian commercial forest risk transfer. The explanation of how insurers price risk within a portfolio helps identify the specific data needed for a proper risk management strategy to be developed.
Nonlinear Regression Models to Identify Functional Forms of Deforestation in East Asia
Identification of the factors involved in deforestation could lead to a comprehensive understanding of deforestation on a broad scale, as well as prediction capability. In this paper, regression models with two explanatory variables-human population and relief energy, i.e., the difference between the maximum and minimum altitudes in a sampled area-were verified as to whether they could elucidate aspects of deforestation. The functional forms of the nonlinear regression models were estimated by step functions analyzed with the use of high-precision Japanese data. Candidate smooth regression models were then derived from the obtained sigmoidal shapes by the step functions. Models with spatially dependent errors were also developed. Akaike's information criterion was used to evaluate the models on four data sets for the East Asia region. From the evaluation, we selected the best three models that systematically showed the best relative appropriateness to the real data.
The role of fire and soil heating on water repellency
This paper describes the heat transfer mechanisms operating as heat moves downward in the soil along steep temperature gradients during both wildfires and prescribed fires. The transfer of heat downward in the upper part of the soil is enhanced by the vaporization and movement of water and organic compounds. Available information on the changes in the chemistry of vaporized organic compounds is summarized and discussed. An operational theory describing the formation of a highly water repellent soil condition during fire is presented. The relationship between the formation of this fire-related watershed condition and subsequent surface runoff and erosion from wildland ecosystems is explored. Worldwide literature describing fire-induced water repellency is reviewed and summarized. q 2000 Elsevier Science B.V. All rights reserved.