Wildfires have created instability within risk transfer markets. Here’s a path forward

Author(s): Matthew P. Thompson, David E. Calkin, Donald M. MacGregor, Bryce A. Young, Kimiko Barrett, Erica C. Fischer, Jesse V. Johnson

Abstract

Escalating wildland–urban fires are generating unprecedented social, economic, and environmental losses while exposing critical weaknesses in insurance and risk transfer systems. The increasing frequency and severity of these events are driven by interacting factors, including historical fire suppression, expanding development in fire-prone landscapes, and climate change, resulting in risks that exceed the capacity of existing insurance markets to accurately assess and absorb. This article examines how inadequacies in current wildfire risk modeling contribute to market instability, reduced insurance availability, and growing financial vulnerability for households and communities. The authors argue that effective risk transfer requires a systems-based approach that integrates advanced wildfire behavior and built-environment risk modeling, stronger building codes and land-use policies, targeted mitigation investments, and coordinated action among governments, insurers, researchers, and communities. By improving the quantification and management of wildfire risk, policymakers and industry leaders can strengthen community resilience, support sustainable insurance markets, and reduce the long-term societal costs of catastrophic wildland–urban fires.

Citation

Thompson, M. P., Calkin, D. E., MacGregor, D. M., Young, B. A., Barrett, K., Fischer, E. C., & Johnson, J. V. (2025). Wildfires have created instability within risk transfer markets. Here’s a path forward. Proceedings of the National Academy of Sciences of the United States of America, 122(46), e2530050122. https://doi.org/10.1073/pnas.2530050122