Financial Protection Against Catastrophic Risks

4. Insurance coverage for wildfire risk

Abstract

Development in the wildland-urban interface and weather conditions that have become more conducive to fire ignition and spread have led to a dramatic increase in wildfire losses in the last decade. Insurance has absorbed a significant a share of past losses in countries with high levels of property insurance take-up. However, increasing losses have led to challenges in accessing affordable property insurance coverage. This chapter outlines the impact of increasing losses on the availability of affordable insurance coverage in wildfire-exposed countries. It also discusses the measures that insurance regulators and the insurance sector have taken to address these challenges, with a particular focus on encouraging risk reduction as a sustainable approach to improving availability and affordability.

4.1. Introduction

Wildfires and the resulting smoke can damage homes, businesses and infrastructure when fires or smoke reach built-up areas. The damage to communities impacted by a wildfire can be substantial as burnt buildings are often a total loss (InsTech, 2023[1]). For example, a damage assessment found that more than 50% of the approximately 30 000 structures within the communities affected by the January 2025 wildfires in Southern California were destroyed (Horton et al., 2025[2]).

A number of regions of the world have seen an increase in the frequency, size and severity of wildfires in recent years (OECD, 2023[3]; Below, Wirtz and Guha-Sapir, 2009[4]). While most wildfires occur in sparsely inhabited regions and have limited direct impacts on human settlements (Jones et al., 2022[5]), wildfires that occur near populated areas can have significant economic and human consequences.1 There has been a notable increase in the frequency of disastrous wildfire since 2015, particularly in the Mediterranean region of Europe and the Western United States (Cunningham et al., 2025[6]). In OECD Members, average annual economic losses from damaging wildfires increased by 360% in 2015-2024, relative to 2000-2014, (and by 371% in OECD Members and accession candidate countries overall) (Figure 4.1).2

Figure 4.1. Wildfire economic losses (2000-2024)

Source: OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)

Development in wildland-urban interface areas is an important driver of losses from wildfires.3^,4 In some countries, substantial assets and populations are located in wildland-urban interface areas. In Portugal, more than 60% of industrial zones are located near forests exposed to wildfire risk (Swiss Re and Liberty Mutual Insurance, 2025[7]). In the United States, 30% of the population is located in wildland-urban interface areas (Guy Carpenter, n.d.[8]). In some regions, wildland-urban interface areas at risk of wildfire have seen significant population growth (Chen et al., 2024[9]). For example, in the United States, housing unit growth in wildland-urban interface areas was 47% between 1990 and 2020, compared to 33% in other areas (Swiss Re and Liberty Mutual Insurance, 2025[7]). Wildfires that occur in wildland-urban interface areas can trigger urban conflagrations where fire spreads from structure to structure and the primary source of fuel becomes the structures in the built environment (Cotality, 2025[10]; Watkins, Brinkmann and Siddique, 2025[11]). There has been at least ten major urban conflagrations triggered by wildfires in the United States since 2020 (Cotality, 2025[10]), including the fires that devastated a number of communities in the city of Los Angeles in January 2025 (Box 4.1).

Box 4.1. Southern California wildfires (January 2025)

Two major wildfires devastated several communities in the region around the major city of Los Angeles between 7 and 31 January. The Eaton and Palisades fires damaged or destroyed more than 18 000 structures (Verisk, 2025[12]), causing approximately USD 40 billion in insured losses and USD 65 billion in economic losses (Bowen, Kerschner and Ng, 2025[13]).

The spread of the wildfires was driven by an abundance of fuel, delayed onset of winter precipitation, very strong winds and unseasonably warm temperatures that combined with dense construction in the affected areas to trigger urban conflagration (Bowen, Kerschner and Ng, 2025[13]; Saleh, 2025[14]).

The two fires led to the largest ever insured loss from a wildfire (Swiss Re and Liberty Mutual Insurance, 2025[7]) and have had significant impacts on the California insurance market. The state’s Fair Access to Insurance Requirements (FAIR) Plan received approval for a USD 1 billion assessment on member insurers in order to ensure the continuous ability to pay claims related to the fires¹ (CDI, 2025[15]). The state’s largest insurance provider faced a two-notch credit rating downgrade triggered, in part², by the impact of losses from the Eaton and Palisades fires (Sclafane, 2025[16]).

Notes:

¹ As discussed below, the FAIR Plan is a private association of insurance companies that operate in the state that provides basic property insurance coverage to households and businesses that are unable access coverage from the private insurance market. The FAIR Plan, with the approval of the California Insurance Commissioner, can issue an assessment on member insurers if it does not have sufficient financial capacity to pay its claims.

² The credit rating downgrade also reflected uncertainty about regulatory approvals of the company’s pricing proposals and concerns about the willingness of the parent company to provide capital support to the affiliate operating in California (Sclafane, 2025[16]).

Changes in precipitation patterns, temperatures and storm activity are expected to lead to increasing fire losses in the future (Chen et al., 2024[9]; OECD, 2023[3]).5 For example, one recent study estimated that the duration of fire weather seasons (i.e. “conditions conducive to fire ignition and spread”) increased by 27% globally between 1979 and 2019, and by more than 40% in the United States, Central America, Europe, South America (south of the equator) and Central Asia (Jones et al., 2022[5]). Another study projects a significant increase in seasonal fire weather conditions in 68-91% of fire-prone regions globally by the end of the 21^st century, relative to 1980-2014 (Gallo et al., 2025[17]).

Several factors impact the level of wildfire risk in the OECD Members and accession candidate countries that have been most impacted by this risk.6 These include the length of the fire weather season, size and significance of wildland-urban interface areas and the prevalence of the wood-frame housing that is more vulnerable to urban conflagration (Table 4.1) (Giammanco et al., 2023[18]). In the last ten years, average annual economic losses have been highest in the United States, Canada, Australia and Portugal7 and have increased most, relative to 2000-2014, in Chile, Canada and the United States. Australia, Canada, Chile, Greece, Indonesia, Portugal and the United States have all faced severe wildfire loss years with annual economic losses exceeding USD 1 billion.

Table 4.1. Wildfire risk characteristics

	Fire weather season length (annual mean, 1979-2019)	Size and significance of wildland-urban interface areas	Share of population in wood frame housing
Argentina	48 days	40 000 – 80 000 km2 (1-3% of total area)	0-10%
Australia	130 days (50 days (Southeast Australian Forests))	100 000 – 200 000 km2 (1-3% of total area)	50-60%
Brazil	48 days (41 days in Southern Amazonia)	200 000 – 500 000 km2 (2-6% of total area)	0-10%
Canada	12 days	40 000 – 80 000 km2 (0.5-1% of total area)	30-40%
Chile	48 days	20 000 – 40 000 km2 (26-53% of total area)	20-30%
Colombia	27 days	40 000 – 80 000 km2 (3-7% of total area)	0-10%
France	17 days (52 days (Mediterranean))	100 000 – 200 000 km2 (18-37% of total area)	0-10%
Greece	17 days (52 days (Mediterranean))	10 000 – 20 000 km2 (7-15% of total area)	0-10%
Indonesia	10 days (12 days (Indonesian Forests)	200 000 – 500 000 km2 (10-27% of total area)	0-10%
Israel	96 days	Less than 10 000 km2 (less than 45% of total area)	0-10%
Italy	17 days (52 days (Mediterranean))	80 000 – 100 000 km2 (26-34% of total area)	0-10%
Portugal	17 days (52 days (Mediterranean))	10 000 – 20 000 km2 (10-22% of total area)	0-10%
Spain	17 days (52 days (Mediterranean))	80 000 – 100 000 km2 (15-20% of total area)	0-10%
Sweden	17 days	10 000 – 20 000 km2 (2-5% of total area)	0-10%
Türkiye	96 days (52 days (Mediterranean))	100 000 – 200 000 km2 (12-26% of total area)	0-10%
United States	44 days (86 days (Pacific US Forests) and 10 days (Alaskan Forests))	500 000 – 1 200 000 km2 (5-13% of total area)	30-40%

Notes: Fire weather season length for Global Fire Emissions Database macroregions and (in brackets) focus eco-regions (where available) from Jones et al. (2022[5]), Global and Regional Trends and Drivers of Fire Under Climate Change; Size of wildland-urban interface is from Chen et al. (2024[9]), Wildfire risk for global wildland–urban interface areas; Share of population in wood frame housing is from Daniell, Schaefer and Wenzel (2017[19]), Losses associated with secondary effects in earthquakes.

Increasing wildfire losses are impacting the availability of affordable insurance in some wildfire-exposed countries. As mortgage lenders will often require borrowers to have insurance coverage against fire risk, reduced access to affordable insurance could have implications for housing markets. In the US state of California, for example, 13% of realtors reported that a housing sale had been cancelled in 2024 as a result of a lack of insurance or affordable insurance (Watkins, Brinkmann and Siddique, 2025[11]). In some high-risk wildfire areas in Australia and the United States, property values have declined by 5% and 7.5%, respectively, relative to lower-risk properties in the same area (Swiss Re and Liberty Mutual Insurance, 2025[7]).

This chapter outlines insurance market and regulatory approaches to wildfire risk in OECD Members and accession candidate counties that face significant exposure to wildfire risks.8 The first section provides an overview of the availability, affordability and take-up of residential and commercial insurance coverage against wildfire risk. The second section outlines efforts to support the availability, affordability and take-up of coverage, including through insurance sector contributions to encouraging risk reduction and adaptation.

4.2. Property insurance coverage for wildfire risk

Standard property insurance coverage provided to households and businesses in most countries includes damages resulting from fire from any source, including wildfires. As a result, the share of losses insured is relatively high, particularly in countries where property insurance penetration is high (Figure 4.2).9

Figure 4.2. Insurance coverage of wildfire losses and property insurance penetration

Note: The calculation of the insured share of economic losses only includes loss years where an insured loss was reported. There were no reported insured or economic losses in France during this period. There were no reported insured losses in Argentina, Brazil, Colombia, Italy and Indonesia. The property insurance penetration rate for Spain is likely underestimated as the premiums collected by the Consorcio de Compensación de Seguros are not included in the data used for the calculation.

Source: OECD calculations based on insured and economic loss data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.) and property insurance penetration rates, including household and business property insurance, from OECD (2025[20]), Insurance business written by class of insurance.

4.2.1. Wildfire insurance availability

Insurers in some countries limit the coverage provided to some highly exposed households and businesses by applying exclusions for wildfire losses, imposing lower insured limits or higher deductibles for wildfire-related damages, or by not offering any property insurance coverage at all.10

Those exposed to higher wildfire risk in some countries may face challenges in accessing insurance coverage. For example, in Chile, a sample of online insurance offers in Valparaíso, which has been affected by major fires in recent years,11 found that fewer offers were available for a hypothetical rural property located in a forested area, relative to urban and suburban properties in the area.12 In Portugal, a 2021 survey (Almeida et al., 2021[21]) found significant insurer reluctance to provide coverage for properties at risk of rural fire. A limited review of online insurance coverage offers for hypothetical rural homes in five locations in Portugal in April 202313 found that some rural households in higher-risk locations could face challenges in accessing insurance coverage as a result of the age of the structure and/or its construction materials. However, a more recent review for the Coimbra region in 2025 found that a similar number of coverage offers were available for urban, suburban and rural properties in the area.14

Some households and businesses in the United States that are highly exposed to wildfire risk have faced challenges in accessing property insurance coverage from private insurance markets.

• In 2024, in the face of increasing losses, a number of insurance companies announced that they will not renew existing coverage and/or reduce new business in the state of California, and some announced complete exits from the market (Jacobson, 2024[22]). A limited review of online insurance coverage offers for homes in one community exposed to wildfire risk in October 2024 found few, and sometimes no, offers of coverage, particularly for addresses located adjacent to forested areas.15 In 2025, following regulatory changes allowing for the use of forward-looking catastrophe models and the integration of reinsurance costs into insurance pricing (see the section on Enhancing the availability of insurance coverage), a number of private insurers reportedly committed to continue offering coverage in the state (PropertyCasualty360, 2025[23]). However, a review of insurance coverage offers for hypothetical homes near Santa Rosa in November 2025 found fewer offers of coverage for suburban and rural properties near forested areas.16 A recent report from an insurance service provider similarly reported continued challenges in accessing insurance for households located in wildland-urban interface areas in California (Cotality, 2025[10]).

• In the US states of Colorado and Oregon, there are similar reports of private insurers reducing the availability of coverage in high-risk areas (Cotality, 2025[10]). A limited review of insurance coverage offers available for hypothetical homes near Boulder (Colorado) found a similar level of offers for urban and suburban properties although fewer offers available to a rural property located near a forested area.17 Challenges in accessing residential and commercial insurance coverage have also been reported in the US state of New Mexico (Hallo, 2025[24]). In the US state of Arizona, the Department of Insurance and Financial Institutions has established a Resiliency and Mitigation Council to examine challenges in the availability and affordability of insurance for natural hazard risks, particularly wildfire risks, and identify strategies to mitigate potential losses and improve the availability and affordability of coverage (Arizona Department of Insurance and Financial Institutions, 2024[25]).

4.2.2. Wildfire insurance affordability

Where insurance is available from private insurance markets, some wildfire-exposed households and businesses could face high premiums for coverage. High premium costs could lead households and businesses to underinsure their property18 or not acquire any insurance at all, if not required by a lender.

There are no broadly accepted measures of what should be considered an affordable premium cost. One measure of “affordability stress” developed by the Actuaries Institute in Australia suggests that households that face property insurance premium costs above four weeks of gross household income could be considered affordability-stressed (Paddam et al., 2024[26]). The Actuaries Institute applied this measure in an examination of the impact of natural hazards on insurance affordability in Australia. They found that, while coverage for wildfire (“bushfire”) damage accounts for less than 10% of the direct loss components of premium costs,19 on average (Paddam et al., 2024[26]), the wildfire component of the premium cost accounted for 10-25% of the premium cost for about 10% of “affordability stressed households” and more than 25% of premium cost for approximately 2-3% of those households (Paddam, Liu and Philip, 2024[27]).

Households in Canada and the United States that are exposed to wildfire risk have also faced increasing premiums. One analysis of premium quotes by an insurance rate aggregator found that increases in home insurance costs between 2023 and 2025 were much higher in the Canadian cities most exposed to wildfire risk (Starov, 2025[28]). In some of the most highly exposed cities, insurance costs reportedly increased by more than 50% during that period (Starov, 2025[28]). In the United States, average premiums in wildfire-exposed regions of Colorado have reportedly increased by 60% in the last five years (Cotality, 2025[10]). In the US state of California, average household property insurance premiums increased by 54% between 2015 and 2022 and by more than 80% in the areas facing the highest wildfire risk (Kousky, 2025[29]).

Home insurance premiums as a share of monthly income appear high in some jurisdictions (Figure 4.3). In Australia, a hypothetical rural household in a high-risk area could face premiums of more than 60% of average monthly income in the state of New South Wales and close to 100% of average monthly income in the state of Victoria.20 In the US state of Colorado, the average insurance premium offers for all of the hypothetical suburban and rural homes were equivalent to 70% or more of average monthly income. In the US state of California, the insurance premium offers were lower overall, although there were few offers available from insurers for the hypothetical suburban and rural households. In the Canadian province of Alberta, insurance premium offers had costs approaching or exceeding the average monthly income for hypothetical households in both urban and suburban areas while, in British Columbia, the insurance premium offers were, on average, approximately 70% of monthly income for hypothetical households in urban, suburban and rural areas.21 Conversely, none of the online insurance premium offers in Chile, France, Greece, Italy, Portugal or Spain accounted for more than 15% of average monthly income.

Figure 4.3. Premium costs as a share of monthly income

Note: OECD calculations based on: (i) available online insurance premium offers in the identified regions for hypothetical homes located in a central urban area, two suburban areas adjacent to forested land and a high-risk rural location; and (ii) estimates of gross disposable income per capita of households in 2023 from OECD (2024[30]), Gross disposable income per capita of households and NPISH (indicator), adjusted for the identified region based on OECD (2024[31]), Disposable income, net (indicator).

Where insurance companies apply risk-based pricing, policyholders with greater exposure to wildfire risk would normally face higher premiums, which could lead to affordability stress. While the application of risk-based pricing can impact affordability, risk-based premiums can also provide important risk signals on property-level risk exposure and incentives for risk reduction and adaptation if premium discounts or reduced premiums are offered to those that take actions to reduce their exposure to risk.

4.2.3. Wildfire insurance take-up

Insurance coverage for wildfire risk may be available and generally affordable although a substantial share of households in some countries may decide not to acquire insurance coverage. Property insurance penetration, measured as premiums as a share of GDP, is below the OECD average in Chile, Colombia, Greece, Israel, Italy, Portugal, Spain, Sweden and Türkiye, although property insurance penetration is an imperfect indicator of the take-up of coverage. In Chile and Colombia, the share of households that have property insurance is reportedly below 10% (Lesmes Díaz, 2025[32]; Portal Red Salud, 2025[33]). In Greece, the insurance association estimates that just under 17% of households have property insurance with building coverage (Hellenic Association of Insurance Companies, 2025[34]). In Türkiye, less than 30% of households have property insurance (Merkezi, 2025[35]) while in Italy and Portugal, approximately 49% and 55% of households have coverage, respectively (Assinews.it, 2025[36]; Carvalho, 2025[37]). The take-up of household property insurance is higher in Spain (close to 80% (UNESPA, 2025[38])) and Sweden (over 95% (OECD, 2025[39])).

The take-up of insurance coverage in some countries is lower in the rural areas that are likely to face higher exposure to wildfire risk. Homes in rural areas are more likely to be detached structures with lower property values than homes in major urban areas, which means that that these households are less likely to be subject to an insurance requirement. Figure 4.4. Insurance take-up and wildfire exposure in Italy, Portugal and Spain provide an illustration of the correlation between exposure to wildfire hazard and insurance take-up in Italy, Portugal and Spain.

Figure 4.4. Insurance take-up and wildfire exposure in Italy, Portugal and Spain

Note: Data on insurance take-up is from: ASF (2024[40]), Relatório de Estabilidade Financeira do Setor Segurador e dos Fundos de Pensões - dezembro 2023 for Portugal; Assonews.it (2025[36]), A marzo 2025 erano 12,3 milioni le polizze property a tutela delle abitazioni civili for Italy; and UNESPA (2025[38]), Memoria social del Seguro for Spain. Due to differences in estimates, higher insurance coverage refers to regions where more than approximately 55% of households have insurance in Portugal, 60% in Italy, and 65% in Spain. Wildfire risk maps are from ICNF (2023[41]), Carta de perigosidade de incêndio rural for Portugal; Kirschner et al. (2024[42]), Governance drivers hinder and support a paradigm shift in wildfire risk management in Italy for Italy; and AEMET (n.d.[43]), Interpretación: Incendios for Spain.

4.3. Measures to support the availability, affordability and take-up of insurance for wildfire risk

4.3.1. Enhancing the availability of insurance coverage

Households and businesses that are highly exposed to wildfire risk may face challenges in accessing insurance coverage. A review of online insurance offers for different types of hypothetical homes in high-risk areas suggests that some households in Portugal and the United States are more likely to face challenges in accessing coverage. For a variety of reasons, these challenges appear to have led to more significant concerns in the United States than in Portugal. 22

A number of US states have established residual insurance arrangements that provide limited coverage to households, and sometimes businesses, that are unable to access coverage from private insurers in order to ensure the availability of basic coverage.23 Fair Access to Insurance Requirements (or FAIR) Plans have been established in many of the states in the western United States that are highly exposed to wildfire risk, including California, Colorado,24 New Mexico, Oregon and Washington25 (Jablonski, 2025[44]). In some of these states, FAIR Plans have been established only recently.

As wildfire-exposed households’ access to private insurance has declined, the number of households that have acquired coverage from FAIR Plans in the US states of California and Washington has increased significantly and at a much faster rate than in other parts of the country, although from a low base in the case of Washington (Figure 4.5).

The number of commercial policies has also increased. In California, for example, the number of commercial policies written by the FAIR plan more than doubled between 2010 and 2024 (III, 2025[45]). In some states, including California, New Mexico and Oregon, the amount of coverage that FAIR Plans can provide has also been increased in recent years to address challenges in accessing private insurance market coverage (Hallo, 2025[24]; Professional Insurance Agents Western Alliance, 2023[46]; Sellers, 2025[47]). For example, the California FAIR Plan increased the amount of coverage it could provide to households to USD 3 million (Kousky and Friedrich, 2025[48]) and has developed a commercial high value policy offering coverage of up to USD 20 million per building and USD 100 million per location (Insurance Journal, 2025[49]). The total sum insured by FAIR Plans, including both residential and commercial properties where eligible, was more than 8 times higher in Washington, 9 times higher in California and 12 times higher in New Mexico26 (III, 2025[45]).

Figure 4.5. FAIR Plan policy growth

Note: Policy counts were converted to indices given the significant differences in the size of FAIR Plans in different states. In the fiscal year ending in September 2024, the California FAIR plan had provided coverage for more than 400 000 policies, compared to approximately 7 500 in New Mexico, 2 300 in Oregon and 300 in Washington. The index value for the Washington FAIR Plan was 584 in 2023 and 956 in 2024 (not shown). The index for all states includes all FAIR Plans and Beach and Wind Plans for which complete 2010-2024 data was available.

Source: III (2025[45]), Facts + Statistics: Homeowners and renters insurance (based on data from the Property Insurance Plans Service Office (PIPSO)).

While the existence of a residual insurance arrangement can ensure that some coverage is available to high-risk households and businesses, the accumulation of risk in the FAIR Plan could have potential implications for the availability and affordability of coverage offered by private insurers. If a FAIR Plan faces losses beyond its financial capacity, private insurers operating in the state will be responsible for addressing the funding gap through mandated assessments linked to market share. As a result, insurers would likely consider their potential exposure to FAIR Plan assessments when determining their appetite for offering their own coverage, which could lead them to limit the amount of coverage that they offer. Insurers are also likely to pass on assessment costs to their policyholders, with potential implications for affordability, and potentially for the insurer if any supplemental fees to be imposed on policyholders do not receive approval from the regulator. In the aftermath of the Los Angeles wildfires, at least 40 insurers filed requests to recoup a portion of their FAIR Plan from policyholders (Kiriluk-Hill, 2025[50]).

For other natural hazard risks, such as floods and earthquakes, the establishment of public-private insurance programmes has supported the availability of affordable insurance coverage. Public-private insurance programmes have been established in a number of wildfire-exposed countries, including Australia, France, Indonesia, Italy and Spain, although none of these programmes provide coverage for wildfire risk.27 However, the public-private insurance programme that provides basic coverage for earthquake risk in Türkiye will soon expand to include coverage for other natural hazards, including wildfire risk (Bahar, 2024[51]).

The California Department of Insurance has taken additional regulatory measures to support insurance availability.28 In the context of regulatory changes allowing for the incorporation of catastrophe modelling assessments29 and reinsurance costs30 in premium-setting, the California Department of Insurance has included a requirement that insurers increase the availability of private insurance market coverage in areas defined as “distressed areas”.31 The regulations require that insurers that wish to incorporate these factors into their premium rates commit to maintaining at least 85% of their state-wide market share32 in areas identified as “distressed areas” or achieving that by increasing the coverage they provide in those areas by at least 5% every two years (CDI, 2024[52]; CDI, 2024[53]). Since the implementation of the regulation, a number of insurers have requested approval for premium rate increases accompanied by commitments to expand coverage and/or depopulate the FAIR (Hallo, 2025[54]; Kiriluk-Hill, 2025[55]; Kiriluk-Hill, 2025[56]).

Significant demand for insurance coverage in high-risk areas in the United States has also led to insurance sector innovation in risk assessment and product design. Improvements in the quality and availability of earth observations imagery and the development of new tools based on artificial intelligence and machine learning are providing the insurance sector with improved capacities to model wildfire risk and assess the effectiveness of risk reduction measures. Insurance companies and specialised modelling firms can now combine satellite and aircraft imagery with data on building permits, tax assessments and real estate transactions to develop a detailed digital rendering of the physical environment. Data and imagery from historical events can then be used to examine the impact on individual structures and identify the specific factors that drive the susceptibility of structures to fire. These factors can then be used to assess risk at the level of individual buildings by considering the probability that the community might face a wildfire and then the probability that the specific property might be damaged. It also provides a means for continuous monitoring of the implementation of risk reduction and maintenance measures over time.

Insurers are using these advances in wildfire risk models to identify lower risk households within high-risk areas, based on factors such as the distance between individual structures, the susceptibility to ember access through eaves and vents, and whether the area surrounding the home is clear of vegetation that could become fuel that spreads the fire (Watkins and Russell, 2025[57]). Insurers and insurance sector service providers are using these advanced modelling approaches to provide more granular risk assessment, develop detailed scoring systems on structural vulnerabilities, and offer tailored risk reduction advice that enhances the availability of insurance in high-risk areas through better risk selection (STAND, n.d.[58]; Faura, n.d.[59]). According to one coverage provider, 65% of the homes classified as high risk in California could be reclassified as medium or low risk through more granular risk assessment (Dopp, 2025[60]).

The insurance sector is also developing new types of products that could support the availability of coverage, particularly parametric insurance coverage.33 Parametric insurance that makes payments based on the occurrence of a covered event, without the need for property-level loss adjustment, can potentially lead to lower premium costs based on reduced underwriting and loss adjustment expenses. Parametric coverage could contribute to protecting households and businesses against wildfire risk given that structures impacted by wildfires tend to be a total loss, and therefore full payments could be made to all policyholders impacted by a fire as they likely suffered a total loss. In the US state of California, excess and surplus line insurers34 offer parametric coverage based on a “fire-at-location” trigger, acquired mostly by homeowners’ associations, golf courses, wineries and other institutional and commercial entities, although there have been some reports of increasing interest in this form of coverage since the early 2025 wildfire in the Los Angeles region (Laman, 2025[61]; Lerner, 2025[62]). In some countries, such as Chile, insurance regulators have introduced a legislative and regulatory framework to support the development of parametric insurance coverage options (for all types of perils).35 However, the potential for basis risk (i.e. the risk that payments made under a parametric coverage vary significantly from the actual losses incurred) as well as challenges in confirming the cause of a fire could be impediments to the market’s development. The availability of new data sources and analytical tools could support improvements in the design of parametric wildfire coverages that reduce basis risk.

4.3.2. Improving the affordability of wildfire insurance coverage

Households and businesses that have significant exposure to wildfire risk could face premium costs that are unaffordable where insurance companies apply risk-based pricing. This appears to be a greater concern in Australia, Canada and the United States where affordability challenges have arisen and some households have faced premium costs equivalent to a significant share of household income (Figure 4.6).

Insurance companies in most countries have flexibility in establishing the premium rates that they apply to the coverage they provide. For example, in the European Union, insurance regulators are not allowed to interfere with insurer decisions on premium-setting. In Canada, no restrictions on property insurance pricing are imposed (IBC, 2025[63]). However, some other jurisdictions impose some controls on premium pricing. In Indonesia, for example, premium rates for households and commercial property insurance are subject to a minimum and maximum rate as a share of sum insured (OECD, 2023[64]). In the United States, a number of states require insurers to seek prior approval of premium rates or the approach to premium rates that they will apply, including in wildfire-prone states such as California, Nevada and Washington (APCIA, 2022[65]).

Controls on premium rates could directly impact affordability if applied to ensure that unaffordable premiums rates are not imposed by insurers. However, if insurers are unable to charge premium rates commensurate with the level of exposure they are assuming, they will likely choose not to offer any coverage at all (APCIA et al., 2022[66]). Regulatory requirements for prior approval or other requirements that impact rate-setting flexibility could also reduce the entry of new capacity providers (Cotality, 2025[10]).

A more sustainable approach to supporting affordability is to invest in risk reduction and adaptation. There are a number of measures that governments, businesses and households can take to reduce the risk of damaging wildfires, which should support insurance affordability. For example, land-use planning could limit development in the wildland-urban interface in order to reduce the potential for ignitions near populated areas and ensure sufficient space between structures in order to reduce the potential for urban conflagration. Building code improvements that incorporate non-combustible, or less combustible, building materials can greatly increase the ability of homes to survive a wildfire. For example, one insurance service provider’s analysis of the 2025 wildfires in the Los Angeles region found that 80% of the structures in the impacted areas that were built with non-combustible materials survived the fires while 80% of those built with combustible materials were destroyed (Shavel, 2025[67]). Efforts by homeowners and businesses to clear vegetation in areas surrounding buildings (i.e. creating defensible space) could reduce the risk of losses by 20%, based on data from home inspections in California (Nichols Schwartz, 2025[68]), and potentially double a structure’s chance of survival, based on evidence from historical California wildfires (Arrowsmith, Dube Fortier and Cope, 2021[69]). A combination of sufficient structure spacing, defensible space, and fire-resistant materials and ignition resistance have been found in various post-event studies as significant factors in reducing risk and explaining why some structures survived in neighbourhoods that were otherwise destroyed (Nichols Schwartz, 2025[68]; Arrowsmith, Dube Fortier and Cope, 2021[69]; Westhaver, 2017[70]; Zamanialaei et al., 2025[71]).

Given that structures themselves are fuel for wildfires and can exacerbate their spread, important benefits could also be derived by ensuring resilience at the community-level (Watkins, Brinkmann and Siddique, 2025[11]). For example, one study of the impacts of updated building codes on wildfire damage in California found that newer structures not only demonstrated a better chance of survival but also improved the probability that neighbouring homes also survived (Baylis and Boomhower, 2021[72]). The town of Paradise in California, which was almost completely destroyed by the 2018 Camp fire, is being rebuilt with fire-resistant roofs, screened vents to block the entry of embers and substantial defensible space. While the town remains in a high-risk area, that has been subject to almost continuous moratoriums on insurance non-renewals because of nearby fires, insurance companies are once again offering coverage based on the improvements in community resilience (Kiriluk-Hill, 2025[73]).

The application of risk-based pricing and the offering of premium discounts can encourage policyholders to implement these types of investments in risk reduction (APCIA, 2022[65]), particularly where premium costs are high. However, insurers in many wildfire-prone jurisdictions, including in Canada, Chile, France, Greece, Italy and Türkiye,36 are not always imposing higher premiums when covering higher-risk homes. Figure 4.6 provides estimates of the premium differential for the suburban and rural households that would usually be expected to face higher exposure to wildfire risk relative to households in urbanised areas. In most countries, the difference in premium rates charged by insurers appears to be small and premium rates tend to be lower in rural and suburban areas, relative to urban centres. This could reflect differences in exposure to other perils covered by household property insurance, such as crime or vandalism. In some cases, it could also reflect the risk of urban conflagration fires. However, it also suggests that differences in wildfire risk exposure are not always accounted for in premium rates in many countries.

Figure 4.6. Premium differential between urban, suburban and rural households

Note: OECD calculations based on available online insurance premium offers in the identified regions for hypothetical homes located in a central urban area, two suburban areas adjacent to forested land and a high-risk rural location. The premium costs reflect the average for each household type in each area and were transformed into cost per 1 000 in coverage. The premium differential is calculated as the percentage difference in premium cost for the hypothetical suburban and rural households relative to the hypothetical urban households in each area.

A limited examination of online premium offers indicates that insurers in Australia and the US state of Colorado are differentiating premiums based on the difference in potential exposure to wildfire risk in rural, suburban and urban areas. In those jurisdictions, hypothetical suburban and/or rural households, located in wildfire-prone areas and adjacent to a forest, seem to be facing higher premiums than households located in urban centres. In Australia, at least one insurer offered premium rates for hypothetical rural homes that were 15-16% and 30-34% higher if structures were less than 100 meters and 16 meters away from grassland or bushland, respectively.

There are a number of other reasons, beyond regulatory controls on pricing, why insurance companies may be reluctant to apply risk-based premiums (OECD, 2023[74]). Insurance companies may not have the necessary data and tools to assess risk at a granular level. While better data and analytical tools are helping some insurers improve their ability to assess risk at the level of individual properties, the availability of the catastrophe models used by insurers to underwrite and price coverage and manage exposure is limited. Catastrophe models developed by the main commercial modelling firms and international brokers are only available in Australia, Canada, Mexico and the United States (Insurance Development Forum, 2025[75]; Karen Clark & Company, 2025[76]).

Insurers may be also reluctant to provide lower premiums if there is significant uncertainty about the effectiveness of the risk reduction measure in reducing losses (APCIA, 2022[65]) or whether households and businesses have properly implemented those risk reduction measures. For example, one review of the implementation of home hardening and defensible space requirements in the US state of California found that few of the households examined had fully implemented compulsory or recommended mitigation actions (Wilkin, Benterou and Stasiewicz, 2025[77]). There are likely to be specific concerns related to the implementation of defensible space measures given the need for property owners to undertake regular landscaping in order to ensure that areas surrounding the structure remain clear of flammable materials.

The insurance sector is supporting several initiatives to develop specific wildfire resilience standards applicable at both the structure and community-level. In the United States, the insurance sector has established the Insurance Institute for Business and Home Safety (IBHS) which has developed a “wildfire prepared home” certification available to households that implement specific measures related to fire buffers and non-combustible materials (IBHS, 2024[78]) as well as a “wildfire prepared neighborhood” standard that helps communities reduce the probability of ignitions in adjacent areas and limit fire spread within the community (IBHS, 2025[79]). In Canada, the national FireSmart programme has outlined a set of development standards, based on the IBHS standards, to reduce wildfire risk through good design practices in roofing materials, vents, eaves, landscaping and outdoor structures (FireSmart, 2019[80]). Studies using past and modelled events have demonstrated the effectiveness of these standards in supporting survivability (Westhaver, 2017[70]) and the costs and benefits of implementing these standards in different communities (Czajkowski et al., 2020[81]).

Efforts are also under way to develop tools to help homeowners undertake their own assessments of wildfire risk and identify measures to improve that risk. For example, in Australia, the Resilient Building Council, with support from the government and the insurance sector, has developed a Bushfire Resilience Rating Home Self-Assessment App that can help households assess their own risk and identify measures to become more resilient (Department of Home Affairs, 2024[82]). A private sector company in the United States has developed a similar product that will allow households to assess their exposure to wildfire risk and possible actions to mitigate that risk (FireBreak, n.d.[83]).

The insurance regulators in some US states are requiring insurers to provide premium discounts for risk reduction measures. In the US state of Colorado, recent legislation requires that insurers must recognise property-level and community-level mitigation action and designations when underwriting and pricing insurance coverage, either through models that incorporate risk mitigation or, where risk mitigation is not incorporated into models, by establishing and publishing a list of available discounts and premium reductions (Colorado General Assembly, 2025[84]). The legislation also requires insurers to provide notice to policyholders annually on the assessment of policyholder risk that was used for pricing and possible mitigation actions that can be taken (Colorado General Assembly, 2025[84]). Similarly, in the US state of California, the catastrophe models approved for use by insurers in underwriting and pricing coverage must account for mitigation efforts by homeowners, businesses and communities (CDI, 2024[52]). In addition, the “Safer from Wildfires” regulation requires that, if their premium rates vary based on wildfire risk, insurers must also recognise the risk reduction benefits of a set of community-level mitigation designations, such as Fire Risk Reduction Community and Firewise USA Site in Good Standing, and property-level risk mitigation measures such as clearing of vegetation, debris and combustible materials, and building hardening measures applied to roofs, eaves, vents and windows (Hallo, 2025[54]; Kiriluk-Hill, 2025[55]; Kiriluk-Hill, 2025[56]; CDI, 2022[85]).

Similar efforts are being implemented in other US states. The US state of Arizona has set up a Resiliency and Mitigation Council that is mandated to identify strategies to mitigate potential losses (Arizona Department of Insurance and Financial Institutions, 2024[25]). A similar working group has been established in the US state of Washington to provide recommendations on wildfire mitigation and resiliency standards (Office of the Insurance Commissioner, 2025[86]). In the US state of Oregon, recent legislation requires the insurance regulator to work with state fire and forestry officials and representatives from insurance companies to develop recommendations to reduce wildfire risk and improve the availability of affordable insurance, including through premium discounts and other incentives for risk reduction through insurance (Nesteroff, 2025[87]).

Insurers in the United States are offering discounts for risk reduction measures taken by policyholders. A recent review of premium rate submissions to the California Department of Insurance found that insurers are offering a range of discounts for specific property-level mitigation measures and for compliance with property and community standards (Kousky and You, 2025[88]). The level of discounts varied across different types of measures and among different insurers, and were sometimes relatively limited. The most significant discounts are offered for compliance with IBHS property-level standards and the Fire Risk Reduction Community and Firewise USA Site in Good Standing community designations (Kousky and You, 2025[88]). Some insurers are also offering more significant additional “completion” discounts for implementing multiple measures, highlighting the importance of a comprehensive approach to wildfire risk reduction (Kousky and You, 2025[88]). Insurers are also reportedly offering premium discounts in Australia and Canada, including premium discounts to encourage the use of the tools and standards described above. For example, in Australia, two insurers agreed to provide discounts to households that complete an assessment using the Bushfire Resilience Rating Home Self-Assessment App and implement recommended actions (Department of Home Affairs, 2024[82]). In Canada, insurers are offering premium discounts to households that implement the FireSmart measures (IBC, 2025[63]).

Some households and businesses may not have the financial means to implement significant risk reduction measures. Governments can establish funding programmes to support risk reduction investments by households and businesses or even communities. In the US state of California, the insurance regulator is administering a California Safe Homes programme, established to provide grants to households and communities to improve wildfire resilience and insurability (CDI, 2025[89]). Local governments in the Canadian province of Alberta have also provided grants to support household risk mitigation, based on FireSmart assessments and mitigation recommendations, in areas facing high exposure to wildfire risk (IBC, 2025[90]). A number of the residual insurance arrangements in US states exposed to hurricanes also offer grant programmes to support mitigation (Environmental Defense Fund and Cornell University, 2025[91]).

Rebuilding in the aftermath of a wildfire offers a cost-efficient opportunity to improve wildfire resilience. One analysis of the cost of rebuilding a home in the US state of California found that rebuilding to be consistent with the requirements of Part 7 of the California Wildland Urban Interface Code, which is the building standard applicable in high-risk areas, would increase reconstruction costs by less than 3% (based on a USD 500 000 reconstruction cost) and by approximately 3% for rebuilding to the IBHS “wildfire prepared home plus” standard (Barrett and Hawks, 2025[92]). Insurers could potentially offer an endorsement (i.e. add-on) on property insurance that would pay for the additional costs of more resilient reinstatement (OECD, 2023[74]; Kousky, 2025[93]). In some hurricane-exposed US states, insurers are required to offer this type of endorsement in order to improve resilience to hurricane risks (Kousky, 2025[93]). Some insurance companies in Canada are offering these types of endorsements although take-up by policyholders has been limited (IBC, 2025[63]).

Implementing risk reduction and resilient reinstatement measures is also dependent on the availability of the needed fire-resistant building materials and service providers with the necessary expertise. Addressing gaps in the availability of needed materials, supplies and expertise through workforce development, certification programmes, supply chain monitoring and other measures is critical to ensuring that the measures needed to support insurance affordability can actually be implemented.

4.3.3. Enhancing the take-up of insurance coverage

In a number of wildfire-exposed areas, the most significant impediment to broad insurance coverage of wildfire losses appears to be limited take-up of coverage (e.g. Chile, Colombia, Greece, Türkiye and some regions within Portugal). Take-up of insurance coverage that is generally available and affordable may be low if households and businesses attach limited value to acquiring insurance coverage. This may be the case if, for example, they perceive themselves to have limited exposure to wildfire or other covered risks or if they expect to receive financial assistance from government should they be impacted by a wildfire. Efforts to increase wildfire risk awareness and insurance literacy can contribute to increasing demand for coverage. Limiting the availability of public financial assistance or compensation for those that had access to affordable insurance, and ensuring that households and businesses understand those limitations, would counteract what could otherwise be a significant disincentive to acquiring insurance coverage.

Lenders in many countries require households to acquire property insurance coverage as a condition for extending mortgage finance. This includes lenders in Australia, Canada, Chile, France, Greece, Italy, Portugal, Spain and the United States. As noted, property insurance almost always includes coverage for wildfire risk. This has generally led to broader coverage, particularly in countries and regions where the share of households with outstanding mortgages is high, such as Australia, Canada and the United States (Figure 4.7). Mortgage-related requirements are likely to be less effective in achieving broad coverage in regions where households own their homes outright, including in some of the rural areas that are most exposed to wildfire risk and where lower property values likely means fewer homes with outstanding mortgages.

Figure 4.7. Housing tenures in wildfire-exposed countries (2024)

Note: The share of households in Chile that have outstanding mortgages and are subject to a requirement to have fire (and earthquake) insurance coverage may be higher than the estimate included in the chart (12.8%). According to the Comisión para el Mercado Financiero, which oversees a bidding process for insurance coverage associated with mortgage loans, approximately 18.8% of households have outstanding mortgages.

Source: OECD (2025[94]), OECD Affordable Housing Database.

Governments could consider establishing requirements for households and/or businesses to acquire insurance coverage for wildfire risk. In some countries (e.g. France and Portugal), households that reside in multi-unit (“horizontal”) residential buildings are required to have property (fire) insurance coverage. However, multi-unit residential buildings are likely to be more prevalent in urbanised areas that are less exposed to wildfire risk. In Türkiye, households within municipal boundaries are required to purchase the basic coverage for earthquake risk provided by the public-private insurance programme. The mandatory purchase requirement, which is enforced by banks and utility providers, appears to have led to higher take-up of coverage.37 The expanded coverage that will include other natural hazard risks, including wildfire risk, will be designed to provide coverage in village areas as well as municipalities which should support broader coverage for those most exposed to wildfire risk.

In Greece, business with revenues above EUR 500 000 are now required to have insurance coverage for floods, earthquakes and forest fires, while all motor vehicle owners are required to have coverage for floods and forest fires. Businesses must have insurance that covers at least 70% of the value of assets while motor vehicles must be covered for their full market value. Businesses that fail to comply with the requirement may face a EUR 10 000 administrative fine for non-compliance and state aid will not be available for uninsured businesses and motor vehicles. However, businesses that receive two denials of coverage from insurance companies are exempt from the insurance requirement for two years, and can be permanently exempted from the requirement if they receive two denials again when re-applying after the initial two years (Issaias, Theodoraki and Karakatsani, 2025[95]). A mandatory insurance requirement for natural hazard risks has also been implemented in Italy for businesses. The requirement applies to the purchase of insurance coverage for flood, earthquakes and landslides but not wildfire (Tayel, 2025[96]). However, as coverage for these natural hazard risks is usually added to property insurance that would normally include coverage for wildfire risk, take-up of property insurance coverage is also likely to increase. Similar to the case of Greece, businesses that do not comply with the mandatory purchase requirement will be ineligible for state aid (Tayel, 2025[96]). In Greece, owners of residential properties benefit from a reduction in property tax if their property is insured against natural hazards (i.e. earthquakes, forest fires and floods).

While mandatory insurance for wildfire risk could potentially increase the level of financial protection, such measures would not automatically reduce wildfire risk unless accompanied by measures to reduce the potential for fire ignition and spread. Mandatory insurance requirements with insurance coverage that applies risk-based premiums could incentivise risk reduction but could also leave many households or businesses with an insurance purchase obligation that they cannot afford.

4.4. Conclusion

Increasing wildfire risk, driven by development in the wildland-urban interface and weather conditions more conducive to fire ignition and spread, have led to a dramatic increase in wildfire losses in the last decade. While many countries are exposed to wildfire risk, the risk is concentrated in a few countries with long fire weather seasons and significant populations and structures located in the wildland-urban interface. Unlike some other natural hazard risks, coverage for fire risk is a standard inclusion in property insurance coverage in many countries. As a result, insurance in countries with high levels of property insurance take-up has generally absorbed a significant a share of past losses. However, increasing losses have led to challenges in accessing affordable property insurance coverage in a number of regions.

Some highly exposed jurisdictions have taken steps to enhance the availability of property insurance coverage. In many wildfire-prone US states, residual insurance arrangements have provided an increasing share of the coverage for high-risk households and businesses, although the coverage provided is usually limited and expensive. Significant demand for coverage, driven by the broad applicability of mortgage-related insurance requirements in some regions, has led to insurance sector innovation in risk assessment and product design that has expanded availability for lower risk policyholders in high-risk regions. In the US state of California, the insurance regulator has also negotiated a requirement for insurers to offer more coverage in high-risk areas in exchange for flexibility in incorporating catastrophe model estimates and reinsurance in premium pricing.

Addressing affordability challenges is usually more difficult as attempts to suppress premium prices are likely to lead to insurer withdrawals and limit availability. The most sustainable approach to long-term affordability is to invest in risk reduction and adaptation. Risk-based premiums can provide incentives for household and business investment in risk reduction although insurers in some countries do not appear to be reflecting different levels of wildfire risk in premium-setting. For risk-based pricing to be an effective incentive for risk reduction, insurers must be willing to provide premium discounts for policyholders that make investments in risk reduction that can demonstrably reduce losses. The insurance sector is applying its risk management and modelling expertise to identifying effective risk reduction measures. In a few US states, insurance regulators are also requiring that insurers provide premium discounts for specific risk reduction measures. Holistic investments that incorporate home hardening, defensible space and community-level mitigation measures appear be the most effective in reducing losses and receive the most significant premium discounts from insurers.

Requirements to purchase insurance against wildfire risk could enhance the take-up of insurance, particularly if applied in the rural areas where exposure is high and mortgage-related insurance requirements are not broadly applicable. However, mandatory insurance requirements will only have an impact on reducing wildfire losses if accompanied by measures to encourage or require investments in risk reduction.

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Notes

← 1.  Burned areas can also have implications on exposure to flood risk as the loss of vegetation can limit water absorption and increase run-off, with the potential to lead to flash flooding and land and mud slides.

← 2.  Between 2015 and 2024, average annual economic losses in OECD Member and accession candidate countries reached USD 11.2 billion, relative to USD 2.4 billion for the period 2000-2014 (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.). OECD Members and accession candidate countries are: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile. Colombia, Costa Rica, Croatia, Czechia, Denmark, Estonia, Finland, France, Germany, Greece. Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Peru, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Thailand, Türkiye, the United Kingdom and the United States.

← 3.  Wildland urban interface areas refer to areas where the built environment (homes, businesses) and wild vegetation such as forest and grasslands converge (OECD, 2023[3]).

← 4.  In some countries, such as Portugal and Spain, vegetation growth in rural areas, particularly on land that has been abandoned, has been an important source of wildfires although wildfires in rural areas are less likely to result in significant economic losses due to lower asset exposure.

← 5.  Changes in climate conditions are expected to lead to: (i) heavier or longer duration seasonal precipitation can increase the accumulation of burnable fuel; (ii) higher temperatures (including heat waves), longer periods of limited precipitation or drought as well as the spread of plant diseases can lead to the availability of dry fuel that is more susceptible to being burned and facilitate fire spread (which is also exacerbated by stronger winds expected as a result of climate change); and (iii) increasing storm activity could lead to more lightning and the potential for more frequent natural ignitions (OECD, 2023[3]; Chen et al., 2024[9]).

← 6.  Several other OECD Member and accession candidate countries are exposed to wildfire risk and have faced significant wildfires in recent years. For example, a wildfire in November 2025 impacted 2 800 hectares in New Zealand’s Tongariro National Park (Withers, 2025[103]). In the context of unseasonably high temperatures and dry conditions in February and March 2025 in Japan and Korea, both countries faced large and destructive wildfires (Barnes et al., 2025[104]; Climate Central, 2025[105]; Wade, 2025[106]).

← 7.  As a share of national GDP, economic losses have been highest in Australia, Chile and Portugal (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.) and Gross domestic product (2023), current prices (USD) from IMF (2024[97])).

← 8.  The chapter focuses on specific regulatory and supervisory approaches to addressing the availability of affordable wildfire insurance. In the United States, these efforts are consistent with a broader state-level response under the National Association of Insurance Commissioners’ National Climate Resilience Strategy for Insurance, developed by the Climate and Resiliency (EX) Task Force.

← 9.  Property insurance penetration, measured as premiums as a share of GDP, is an imperfect measure of the take-up rate of insurance coverage. Data on take-up of insurance coverage was not available for all countries.

← 10.  Some insurers have suggested that requirements to treat “wildfire” as part of standard “fire” coverage have a negative impact on availability by preventing insurers from offering different terms for wildfire coverage.

← 11.  The Valparaíso region experienced devastating wildfire in 2024. Only 15% of the homes damaged by this fire had insurance coverage as many of the affected areas were located on a hillside that was deemed to be at high-risk and as many of the households in the area were modest- or low-income households who likely had limited funds to acquire insurance.

← 12.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in or near Valparaíso, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in September 2025.

← 13.  This review involved entering data for a hypothetical rural home (principal home of 100 square meters) located in two high-risk rural locations (Isna and Malcata) and three lower-risk rural locations (Campo Maior, São Brás de Alportel and São Cristóvão) into the online simulation tools to calculate premium prices provided by three insurance companies active in Portugal (chosen based on access to a simulation tool). The review was undertaken in April 2023.

← 14.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in or near Coimbra, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in September 2025.

← 15.  The review involved entering data for hypothetical homes into online insurance coverage simulation tools to calculate premium prices provided by various insurance companies active in California (chosen based on access to a simulation tool). The homes were all located in the community of Ventura, California which is surrounded by forested areas that have been affected by wildfires. The locations included (centrally-located) urban homes as well as homes located adjacent to a forested area. Online premium quotes were available from all insurers for one of the central urban addresses but only one online premium quote was available for one of the homes adjacent to a forested area (and none for the other).

← 16.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in or near Santa Rosa, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in November 2025.

← 17.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in or near Boulder, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in November 2025.

← 18.  Policyholders that are not required to hold full reconstruction cost insurance coverage could choose a high deductible or an insured limit that is lower than their home’s predicted reconstruction cost in order to reduce their premium.

← 19.  Direct loss components refer to the premium amount collected to specifically cover direct insurer losses (i.e., net of taxes, duties, profit margins, net cost of reinsurance and insurer expenses). For comparison, almost 30% of the direct loss components of premium costs were accounted for by cyclone risk in the Northern Territory (Paddam et al., 2024[26]).

← 20.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in the Blue Mountains area of New South Wales and the Yarra Ranges in Victoria, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in September 2025.

← 21.  This review involved seeking insurance offers and premium estimates for hypothetical homes located in Fort McMurray in Alberta and Williams Lake in British Columbia, including: (i) a central urban area; (ii) two suburban areas adjacent to forested land; and (iii) a high-risk rural location. The review was undertaken in September 2025.

← 22.  In the United States, households are more likely to have an outstanding mortgage which means that insurance coverage against fire, including wildfire, risk is required. As a result, lack of access to insurance coverage could have more significant implications for housing markets in the United States.

← 23.  Unlike many other types of Public-Private Insurance Programmes, residual insurance programmes in the United States do not benefit from financial support from governments. These programmes generally rely on reinsurance as well as post-event financing and assessments to address extreme losses beyond their capacity. The assessments are usually paid by all policyholders, therefore creating a cross-subsidy between low-risk policyholders and the high-risk policyholders that depend on residual insurance programme coverage (Kousky and Friedrich, 2025[48]).

← 24.  The FAIR Plan in Colorado was established in 2023 to specifically address challenges in the availability of insurance coverage for wildfire and hail risk (Kousky and Friedrich, 2025[48]).

← 25.  There are also reported discussions or inquiries into the establishment of residual insurance arrangements in the US states of Idaho, Montana, Nevada and Utah (Jablonski, 2025[44]).

← 26.  In the fiscal year ending in 2024, the total value insured reached USD 429 billion in California compared to USD 41 billion in 2010. In New Mexico, the total value insured reached USD 950 million compared to USD 69 million in 2011. In Washington, the total value insured reached USD 176 million compared to USD 18 million in 2010. Based on PIPSO data published in (III, 2025[45]).

← 27.  In France, Italy and Spain, the public-private insurance programmes provide coverage for many natural hazard risks although not for wildfire risk. In Australia, the programme is focused on cyclone-related risks. In Indonesia, the programme is focused us perils on earthquake, tsunami and volcanic eruption risks.

← 28.  On numerous occasions, the regulator has also imposed one-year moratoriums that prevent insurers from cancelling coverage in areas affected by a wildfire, including at least three times during the 2024 fire season (Insurance Journal, 2024[110]; 2024[98]; 2024[99]) and twice in 2025, including for those impacted by the wildfires in the Los Angeles area (CDI, 2025[111]; 2025[112]).

← 29.  The California Department of Insurance will examine models before enabling their use in premium-setting (CDI, 2024[52]). At the time of writing, three wildfire risk models have been approved for use in establishing premium rates in California (Saleh, 2025[108]; Verisk, 2025[109]; KCC, 2025[115]).

← 30.  Currently, under requirements included in electoral Proposition 103 of 1988 (Insurance Rate Reduction and Reform Act), insurance companies are generally only able to consider historical losses for the purposes of setting rates (with some exceptions).

← 31.  The California Department of Insurance has developed a mapping of areas (at zip code level) where there are indicators of stress in the availability of affordable wildfire insurance coverage (CDI, 2024[107]). The Department used individual property wildfire risk scores, data on the share of California FAIR Plan policies in the community and information on premium costs relative to income to identify “wildfire distressed areas”.

← 32.  An individual insurance company would commit to achieve 85% of its state-wide market share coverage in distressed areas. For example, if the company has a 10% market share across California, it must achieve an 8.5% market share in distressed areas.

← 33.  In 2025, the OECD Working Party on Insurance and Pensions launched a project aimed at examining the potential contribution of parametric insurance to enhancing financial protection while minimising risks to consumers.

← 34.  In the United States, excess and surplus insurers (or surplus line insurers) offer non-admitted coverage for specialised risks for which coverage is not available in the admitted market. Surplus line insurers are subject to regulatory requirements although are generally exempt from rate and form regulation and their products and policyholders are not protected through state guaranty funds (NAIC, 2025[113]; Kelley and Kish, 2017[114]).

← 35.  In some countries, insurance legislation or regulation may impede the ability of insurance companies to offer parametric insurance coverage, often due to a legislative requirement that insurance payments only be made based on actual loss. For example, in Chile, the introduction of parametric insurance has involved an amendment to legislation that was included in a 2023 Fintech Law and the development of regulations to establish a set of conditions for offering parametric insurance and the type of risks that can be covered.

← 36.  The basic coverage that will be provided through the expanded public-private insurance programme in Türkiye will apply a fixed premium structure for wildfire risk (Bahar, 2024[51]).

← 37.  For example, an estimated 55% of households have basic earthquake coverage provided by the public-private insurance programme even though less than 30% of households have property insurance (Merkezi, 2025[35]).