6 strategies insurers can consider to address wildfire-related losses

Wildfire risk has escalated sharply in recent years, driven by drought, extreme heat and changing land use patterns. Development expansion, longer fire seasons and rising reinsurance costs have turned wildfire from a regional issue into a portfolio level concern for many insurers.

While insurers cannot prevent wildfires, they may be able to influence how wildfire risk translates into insured losses through underwriting, claims, risk selection and capital management decisions. Actions often focus on loss severity, aggregation and repeat exposure; these factors most directly affect financial results.

Here are six strategies that can help insurers manage wildfire-related losses.

1.  Use portfolio analytics to target where wildfire losses repeat

Wildfire losses are rarely evenly distributed. A relatively small share of properties, communities and underwriting programs often account for a disproportionate share of total losses over time. For insurers, the first action is identifying where wildfire losses persist.

Combining claims history, catastrophe models and geospatial data can help insurers identify repeat‑loss properties and high‑correlation zones where a single fire can generate outsize losses. These insights can inform underwriting guidelines, risk selection, attachment points and geographic capacity decisions. Targeting these concentrations may support portfolio quality objectives without requiring wholesale market exits.

2.  Align underwriting and pricing with fire‑resistant features

Underwriting and pricing remain important tools insurers can use to influence insured loss outcomes related to wildfire. Many post-fire assessments have found that structure survival is associated with factors such as building materials, ember resistance and defensible space.

Insurers can reflect these findings by:

• Differentiating pricing or eligibility based on verified fire‑resistant construction and vegetation management
• Establishing clearer minimum standards for coverage in high‑risk zones
• Using underwriting guidelines that recognize mitigation adoption at the community level, not just by individual properties

When underwriting and pricing signals are applied consistently, they may help encourage risk‑reducing behavior and can contribute to improved expected loss outcomes over time.

3.  Use claims and reconstruction to reduce future exposure

Claims handling can be an overlooked lever for managing wildfire risk. Rebuilding after a fire presents a rare opportunity to improve resilience at a modest incremental cost compared to total reconstruction expenses.

Insurers can support resilience-focused rebuilding efforts by aligning settlement processes, guidance and incentives with fire-resistant rebuilding practices. While insurers cannot mandate upgrades universally, claims engagement that consistently promotes ember protection, noncombustible materials and defensible space may help reduce future exposure associated with rebuilt properties. Over time, this approach may help reduce repeat claims and support improved loss experience.

4.  Reduce loss aggregation through early detection engagement

Early wildfire detection with satellites, cameras and artificial intelligence may influence loss aggregation by supporting earlier response efforts. Earlier detection may improve response times, potentially reducing the likelihood that a wildfire develops into a large-scale loss event.

Insurers can account for these effects by:

• Recognizing detection coverage in underwriting and pricing decisions
• Supporting public‑private initiatives that prioritize detection in high‑exposure areas
• Incorporating detection performance into catastrophe modeling assumptions

5.  Use reinsurance and capital strategy to reinforce mitigation outcomes

Wildfire mitigation may have greater impact when reflected in capital and reinsurance decisions. Insurers that integrate mitigation performance into portfolio analytics can better align retentions, limits and reinsurance structures with evolving risk profiles and portfolio characteristics.

Where mitigation efforts result in measurable reductions in loss severity and aggregation, insurers may be able to deploy capital more efficiently and potentially improve reinsurance economics.

6.  Partner selectively to extend impact without expanding risk

Insurers do not need to own wildfire mitigation programs to benefit from them. Targeted partnerships can extend insurers’ influence without expanding their risk footprint. This might include data sharing with municipalities, collaborating with reinsurers on mitigation incentives or participating in narrowly scoped public‑private initiatives.

The goal is to align mitigation investments with measurable risk-management objectives, including reducing insured losses and volatility where results can be demonstrated.

Wildfire mitigation as a financial discipline

For insurers, wildfire mitigation is a financial discipline focused on reducing severity, limiting aggregation and improving portfolio sustainability. Insurers that treat wildfire mitigation as an integrated part of underwriting, pricing, claims and capital strategy are better positioned to navigate rising losses without sacrificing long-term market participation.