Wildfires: State of the Risk

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Wildfire risk is strongly conditioned by geographic considerations that vary widely by state and even within states. Temperature, humidity, wind, and topography vary too widely for a single “one size fits all” mitigation approach.

The 2024 wildfire season in the South and Southwest was particularly severe, marked by such events as the Texas and Oklahoma Panhandle fires in February and March and several significant blazes in Arizona and New Mexico. The Southwest area accounted for the largest number of residential structures destroyed by wildfire, and three of the top five areas for homes destroyed were in the South. California – often thought of as the poster child for wildfire – in 2024 accounted for, by far, the largest number of homes at risk for extreme wildfires. In the first half, the state experienced an above-average number of fires, though most were contained before growing to “major incident” size. Subsequent rains from “atmospheric rivers” suppressed subsequent wildfire conditions – and prompted substantial flooding.

This rain, however – combined with back-to-back wet years – contributed to an accumulation of grasses and other fuels accumulating in the mountains and foothills. When hurricane-force Santa Ana winds whipped through Los Angeles County in early January 2025, the conditions were right for fast-moving blazes to tear through Pacific Palisades and Eaton Canyon. Risk management firm Milliman estimates the insured losses for these fires at between $25.2 billion and $39.4 billion. Colorado officials said they expect a “normal” fire season this year in 2025 – which still translates to roughly 6,000 wildfires statewide.

All of this underscores the importance of granular data gathering and scrupulous analysis when underwriting and pricing insurance. Even in states that are heavily exposed to wildfire risk, pockets of potentially profitable business exist. They just have to be identified. Use of sophisticated modeling and analytical tools is critical.

It is also important that insurers proactively engage with diverse stakeholder groups to promote investment in mitigation and resilience.

(As of May 16, 2025)