Guy Carpenter recently hosted its 2025 California Wildfire Summit to examine the evolving landscape of wildfire risk and its impact on the state’s property insurance market.
The event featured input from industry experts on regulation, reinsurance, capital markets, and wildfire modeling, alongside analyses of recent fire events and tools for portfolio risk management.
The summit highlighted the broader context of the US property and casualty insurance market. While insurers delivered returns in 2024 that aligned closely with the S&P 500, structural challenges continue to affect performance.
Panelists noted that the sector has historically outperformed the S&P due to its defensive characteristics, but emerging pressures are shifting that balance.
Recent policy shifts – including trade tariffs and regulatory updates – are impacting underwriting and capital allocation. Attendees also discussed growing calls to federalize elements of the insurance market, though the complexity of insurance functions raises questions about the feasibility of such an effort.
Participants pointed to external forces such as social inflation and volatile weather as key factors shaping market dynamics. Legal system trends that increase claim costs are complicating the reserving process for insurers and raising premium levels.
At the same time, fluctuating weather patterns are adding uncertainty to loss forecasting and long-term risk assessment.
In the first half of 2025, the reinsurance sector absorbed significant losses driven by wildfire, severe convective storms, and flooding. The Palisades and Eaton fires were identified as major events, consuming a considerable share of reinsurers’ catastrophe loss budgets.
Gallagher Re previously estimated total insured losses from the Palisades and Eaton wildfires to be between US$20 billion and US$30 billion, with Verisk assigning estimates of US$20 billion-US$25 billion for Palisades and US$8 billion-US$10 billion for Eaton alone.
Meanwhile, Swiss Re and Morningstar DBRS projected that total wildfire-related losses in California for 2025 could reach between US$28 billion and US$40 billion. According to the California Department of Insurance, nearly 38,000 claims had been filed by midyear, with over US$12 billion already paid to policyholders.
The California FAIR Plan, designed as a last-resort insurance provider, is carrying significant exposure from the recent fires. The plan reported a US$4.8 billion exposure tied to Palisades and Eaton, and member insurers have already paid out over US$4.2 billion in related claims.
Industry representatives noted that wildfire modeling remains less mature than for other perils, though recent loss experience is accelerating development. Reinsurers have adjusted their assumptions and views of wildfire exposure as a result of these events.
The shift of property coverage into the excess and surplus (E&S) lines market, particularly in California, was also a focus. Industry participants noted continued interest among reinsurers to support E&S growth as a response to volatility in admitted markets.
Another key focus of the Summit was California’s legislative response to ongoing insurance challenges. Several bills were cited for their potential impact on market dynamics.
Lawmakers are pursuing multiple proposals targeting wildfire-related market disruptions. SB547, for example, seeks to extend non-renewal moratoriums for properties located near past fire perimeters.
Other measures include additional oversight of broker placements, transparency in FAIR Plan referrals, and expanded access for manufactured homes. These initiatives are part of a broader push to stabilize California’s property insurance sector through expanded governance and consumer protections.
SB547 extends the moratorium on non-renewals for homeowners' associations and commercial properties. SB429 proposes the creation of a publicly accessible catastrophe model for wildfires, though panelists noted that the tool may face political scrutiny.
AB69 would require brokers to explore private market options before placing policies with the FAIR Plan. AB226 allows the FAIR Plan to access capital markets for claims-paying capacity, though concerns remain over the implications for long-term financial independence.
Attendees also reviewed initiatives on governance reforms, consumer protections, and wildfire mitigation. The focus remained on improving transparency and maintaining insurer accountability while navigating market disruptions.
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