Wildfire season in California and the western US is here, adding to the complexities that agents and brokers in the region must manage. While wildfire risk is not new, the insurance implications of it continue evolving. Agents and policyholders must manage changes in underwriting requirements, carrier appetite, property valuations, and alternative market solutions.
Read on to learn about the challenges and opportunities created by changing wildfire risk and insurance solutions.
The Next Phase of Wildfire Risk
For many policyholders, wildfire risk seems limited to property damage. But in reality, wildfire events can be the catalyst for a range of direct and indirect losses. For homeowners, wildfires can lead to property loss, additional living expenses, smoke damage mitigation, debris removal costs, and extensive rebuilding timelines.
Businesses may experience business interruption and contingent business interruption losses, property damage, supply chain issues, employee displacement, and utility outages. Even businesses not directly impacted by the wildfire can experience losses from disrupted supply chains, customer access, and workforce availability.
Agents can help policyholders prepare for the next phase of wildfire risk and uncover any potential coverage gaps by taking the following steps:
Revisit property values.
Construction costs have fluctuated significantly in recent years. Catastrophic events also can cause regional labor and material shortages as many customers are impacted, which can further raise costs and delay repairs. And some insureds have continued relying on outdated property valuations, creating a significant underinsurance problem. Agents should review replacement costs regularly with policyholders to help evaluate whether policy limits remain adequate. Helping policyholders to understand the difference between replacement cost and market value is a crucial educational opportunity for agents.
Discuss defensible space in insurance discussions.
Wildfire mitigation efforts increasingly impact underwriting and pricing decisions. Many carriers evaluate home hardening measures like vegetation management, defensible space, roof and building materials, and community wildfire mitigation efforts when determining pricing and eligibility. And for consumers on California’s FAIR plan, investing in home hardening measures can reduce costs. Agents can add value by helping policyholders understand how mitigation efforts can impact insurance outcomes.
Proactively work with policyholders before renewal time.
Agents can help prepare policyholders for potential changes in the market before renewals. Waiting until a policyholder receives a non-renewal notice before reacting can limit options and create unnecessary stress. By having proactive discussions, agents can help policyholders evaluate alternatives and develop contingency plans in advance of renewal time. This can significantly improve policyholder outcomes and strengthen relationships.
Explain the growing role of alternative markets to policyholders.
With limited capacity in many areas, agents can educate policyholders about alternative solutions. The California FAIR plan continues to be an option for many property owners who struggle to obtain traditional coverage. E&S carriers are also increasingly available for wildfire-exposed risks. A parametric policy may be a good complement to traditional coverage for some policyholders. As policyholders may be unfamiliar with the benefits and new considerations of these alternative solutions, agents play a critical role in educating them and guiding them to make informed decisions.
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External Links:
- https://www.cotality.com/insights/articles/market-value-vs-replacement-cost
- https://www.cfpnet.com/wp-content/uploads/2025/11/Discounts-for-Dwelling-Fire-Commercial-Policies-2025.11.15.pdf
- https://www.tahoedonner.com/members/land-forestry/land-management-forestry/parametric-wildfire-insurance/
