Wildfire Has Evolved from Natural Hazard to Systemic Threat

Defining "Wildfire" for Insurance Purposes

My wildfire perspective has undergone continuous change ever since my first wildfire recovery experience in the Waldo Canyon Fire in 2012, followed by the Black Forest Fire in 2013, and continued with the Marshall Fire in 2021. Indeed, the 2025 Los Angeles Fires will continue to add insights to the issue as well.

The impetus for this commentary was an industry meeting in late 2024 in which our group was challenged to define the term "wildfire" to develop policy exclusionary language or separate coverage. From my perspective, the answer seemed quite evident: They are natural or human-caused fires, originating in a wildland area that spread to adjacent populated areas, destroying insured property.

The National Interagency Fire Center names wildfires, and the Property Claim Services gives them a CAT (catastrophe) number. Two other definitional sources were provided by various state laws and by the National Fire Protection Association. Despite these definitional attempts, they were not considered sufficiently conclusive enough to draft insurance contractual language.

What was my takeaway from this conversation? It is past time to dive deeper into an agreed-upon definition about the attributes and dynamics of wildfire events so we can better serve our insurance customers and engage in meaningful dialogue with other wildfire stakeholders on implementing improved risk management treatments to this ever-increasing peril.

The Wildfire Peril

From an insurance perspective, a wildfire is considered a type of fire. Therefore, coverage is available under all property policy forms. Wildfire contains the three elements of the fire triangle: fuel, oxygen, and heat. Most wildfires are human-caused, but natural causes, usually lightning, start a few. Wildfires are more probable with high temperatures, drought conditions, and windy areas. All wildfires have unique attributes, making it more difficult to find a general definition.

Let's consider four general wildfire types.

• Forest fires. Traditionally, most wildfires are considered forest fires. They burn large acreage, are caused by lightning, and involve few structure losses. These wildfires typically have a lesser impact than the three remaining types. Their attribute is burning large acreage with few structures. Recent examples of forest fires that burn forests with few houses are the Hayman Fire (2002) and Cameron Fire (2020).
• WUI. These fires often result in losses to homes and businesses that have relocated to a forested area, thereby increasing their susceptibility to human-caused or natural forest fires. In a WUI fire, you can have a single structure or multiple structures. The more buildings in the WUI, the more consequential the fire can become. In conifer forests, the most common trigger of loss to these homes is embers from burning trees, which can embed in home crevices or attics. An added challenge to these fires is the lack of reliable water systems to help extinguish them. Once such a fire starts, it creates other difficulties for the first responders to control its spread. The Black Forest Fire is an example of this type of fire.
• PUI. This type of fire is similar to WUI fires except that buildings are involved, and it takes place near grasslands, which can burn quickly and uncontrollably. Because grass can burn so quickly and spread more rapidly, these fires can also overwhelm more rural fire departments that often protect these areas. The Smokehouse Creek Fire (2024) in the Texas Panhandle and Oklahoma is an example of these fires, which are similar to forest fires in that they burn considerable land area but do not impact as many homes.
• Urban conflagrations. These fires are the most serious. They usually involve a WUI or PUI wildfire that spreads into a densely populated urban area, usually enabled by strong winds. The winds act like a blowtorch, causing the intensity of the fire to increase. Because there is minimal separation between the homes, fire spreads from building to building due to the heat caused by the ignition of the surrounding buildings. Although the water supply is usually sufficient, these fires quickly overwhelm the firefighters, resulting in significant damage to property from fire and smoke. The Waldo Canyon (2012), Marshall (2021), Maui (2023), and Los Angeles (2025) Fires are examples of these fires.

Why do these peril distinctions matter? The type of fire is an early warning method to determine the extent of damage and how to deploy resources to extinguish the fire and handle the post-loss recoveries. They are also a good pre-loss tool to consider when identifying higher wildfire-prone policyholders.

Can wildfire ever be beneficial? Yes, it can if it is controlled. There are two terms used to describe these fires: controlled burns or cultural burns. The latter term is borrowed from our Indigenous neighbors who regularly burned forested and prairie areas for three purposes: to reduce fuels for wildfire ignition, to promote better soil chemistry, or to improve hunting conditions. Controlled burns are now considered a valued tactic by firefighters to create better defensible space around WUI and urban neighborhoods exposed to adjacent wildfire exposures.

Wildfire Claim Types

There can be five types of wildfire claims following a catastrophic fire.

• Total dwelling losses. In all declared wildfire catastrophe events, there will be many total loss claims. A declared CAT loss indicates that anticipated losses must exceed $25 million, so many homes will be total losses. The actual numbers will depend on the economic replacement values but will vary based on the extent of the populated area affected by the wildfire. The post-loss scenes are horrific; usually, only some metal debris and a foundation or slab survive the fire. Everything at the insured premises is destroyed. In such a setting, the foundations have likely been compromised due to the extreme heat generated by the fire. The heat can be measured by how much metal objects were altered during the fire. In the immediate aftermath, such premises are unsafe for adjusters and insureds alike until the utilities have been secured at the location and the public health officials have determined whether harmful pollutants exist from the complete burning of the home.
• Smoke claims. Smoke claims can create many challenges for claim adjusters after a fire, depending on the type of wildfire. There are a few agreed-upon standards for remediating smoke claims, which adds to their complexity. These claims are especially problematic in wind-driven wildfires in urban settings because the smoke is invasive and seeps into every unsealed area of affected buildings. Because this type of smoke often contains household pollutants in addition to regular wildfire smoke, the remediation of these claims can be expensive and very contentious since there are few standards to determine the levels of necessary restoration. Structures that are a half mile downwind can sustain significant hidden smoke damage that may require extensive repairs to clear the smoke damage. It is possible that this perimeter can be extended beyond this area if the winds are strong and the topography channels the smoke to buildings further away. Sometimes, coverage is questioned if it is determined that the smoke did not cause direct physical damage to the property. These smoke claims and those involving immunological and respiratory issues are even more challenging to resolve.
• Heat claims. Besides smoke, heat is a byproduct of any fire, and wildfire is no exception. The challenge with heat claims is knowing the temperatures to which a structure was exposed and how this heat damages certain materials. Psychologically, a difficult discussion with insureds is to explain why, just because their neighbor's home burned 100 feet from their home, with temperatures estimated to be over 2,000 degrees Fahrenheit, the perceived damage to their home is not proximately caused by the fire. Like a campfire, heat dissipates quickly as the distance from its source increases. The causality of these claims is usually much more difficult to prove and requires assistance from forensic engineers to help determine the causality of the damage.
• Flood claims. In some locations in or near a wildfire footprint, it is possible to have flood or mudslide claims that are considered to have been proximately caused by the wildfire. These wildfire-induced flood claims are more common in mountainous or hilly terrain. How is it possible to evaluate the causal relationship between wildfire and floods? Hot wildfires damage the soil, resulting in a hydrophobic soil condition, which makes it impossible for rain to permeate it. When there is a significant rain event following the wildfire, these waters have no place to go but run downstream with damaging effects.

  Additionally, the loss of plants and trees does not break the force of the rain nor absorb moisture, which further compounds the amount and force of the water to create a flood condition. As this water gains force, it gathers debris that adds additional flooding impacts. While these flooding events are not associated with all wildfires, they can add another dimension to postwildfire claims.

• Partial fire claims. Although wildfires are catastrophic, they do not always burn all structures to the ground. The extent of these claims varies, too, from slight to enough damage to consider the dwelling a constructive total loss. These claims are often the positive result of the firefighter's success in controlling the spread and defense of the fire. They are both good and bad news claim situations. It is generally considered good that the structure and its contents were saved. However, these claims are often accompanied by considerable smoke damage and more complex repair issues, which can create a challenging claim situation.

Unless you have witnessed wildfire claims firsthand, it is difficult to appreciate the many nuances that each one has. Indeed, each one's characteristics require special claim applications and can often require specialized expertise.

Wildfire Geography

A common perception is that the American West is more prone to wildfires than other areas of the United States. This perspective results from the reality that many severe fires have occurred in this area of the country, but we are now witnessing more wildfires happening in other areas of the United States as well. Who could have imagined the Maui fires?

In the past year, we have seen wildfires in the Northeast, Southeast, and Midwest. In addition, many parts of the United States have experienced significant wildfire smoke pollution from the Canadian wildfires. Why should this matter to insurance professionals? There are two reasons: (1) as this peril continues to spread to other geographic areas, we need to evaluate wildfire potential for all areas carefully in the future, recognizing many new forces are making this peril more prevalent and dangerous; and (2) our society and industry need to find more innovative ways to insure and prevent this growing peril.

There are three additional realities to consider when thinking about wildfire.

• A wildfire is a natural phenomenon that can happen and has happened anywhere on the planet where there is fuel to burn.
• The worst historical United States wildfire occurred in Wisconsin back in the 19th century. About 10 years ago, I learned about major wildfires in Maine in the late 1940s.
• Wildfire professionals consider the Pine Barrens in New Jersey among the most wildfire-prone areas in the country.

Bottom line: Wildfire is a growing exposure to more insurance consumers, so industry professionals need to be more proactive and engage in the identification and risk management of wildfire.

Wildfire Causation

Hardly a day passes without a new simple answer to fixing our wildfire problem. Sadly, most of the "solutions" assume that wildfire has a simple causation chain of events, when there are so many contributing factors to the issues over which we have either limited or no control. A more pragmatic approach to this issue requires us to continually observe and evaluate the crucial lessons that each wildfire is teaching us so that we can find better solutions for addressing this peril and engaging with other wildfire stakeholders, emergency managers, regulators, and public officials.

This commentary is too limited to address wildfire causation in detail. To lay the foundation for future commentaries and suggest the importance of tackling them, let me comment on a few of the commonly accepted causes.

• Extreme weather. There is consensus that, for whatever reason, the weather is becoming more extreme as measured by temperatures, rainfall amounts, and wind velocity. There continues to be some controversy about the cause of these more extreme events, how to best evaluate them, and how to handle them most economically. Since the recent politicization of climate issues, this process will take time and will create contradictory findings in the short term. Still, it needs to be addressed as nonpartisanly as possible. An insurance professional's role is to continuously keep current with evolving scientific studies, learn from each catastrophic event, and avoid recommending risk solutions that are not based on good data.
• Forest and landscape mitigation. There is consensus that our current forests and landscapes contain too much combustible fuel. The quick answer is to reduce the fuel loads in our exposed forests and neighborhoods. While this continues to be a realistic method to lower the wildfire risk, two diverse questions arise: (1) what mitigation standard should be applied, and (2) who pays for it? Public policy and insurance practices need to reach an agreement on how best to make this happen so that it can be communicated to our insurance consumers with a singular voice.
• Zoning and building codes. If wildfire is a recognized problem, why don't more governmental entities restrict development or require more resilient construction in the WUI and PUI? There is consensus that the continued and increased presence of people in the WUI areas is only increasing the wildfire risk. In many instances, the cost to develop in these areas is less than building in traditional urban and suburban areas, which have higher taxes to pay for emergency services and other governmental services.

  As the severity of wildfires increases, there is growing evidence that many building codes, especially in WUI areas, do not promote the new construction or repair of buildings to meet this increased threat. Traditional fire and building codes are excellent examples of how society and the insurance industry have made a difference in reducing the conventional fire risk experienced over the past 200 years. Sustainable construction code recommendations are available through the work of the Insurance Business and Home Safety fortified program recommendations. It is time to adopt these codes in all wildfire-prone areas more aggressively.

• Utility infrastructure. There is little question that wind and utility lines are often the proximate cause of wildfires. In those occasions where downed utility lines or branches are hitting utility lines and causing losses, the immediate response is to litigate against the utility. Certainly, utility companies need to exercise greater care in maintaining these utility lines, but the question is cost, and who pays? Is it better to charge more for electricity and perform more aggressive maintenance and vigilance over their upkeep proactively, or is it better to sue the utilities and spread those costs to users retroactively? Besides electrical infrastructure, there is increased concern about the adequacy of water supplies to fight these wildfires. As evidenced by the Los Angeles Fires, the lack of water when disaster strikes is problematic for extinguishing wildfires.
• Disaster economic recovery realities. These factors are the post-loss economic realities that add to the insured costs from wildfires. The demand surge that happens after a major disaster is a very real problem over which insurance companies have little or no control. Inflation, supply chain shortages, labor shortages, housing, and public disaster spending are all essential issues to consider when addressing wildfire recoveries, as well as those regulations and claims practices adding friction to quick recoveries. Assuming wildfires and other natural catastrophes are our new reality, it is time for insurance professionals to start working with different stakeholders on measures to lessen these cost factors.
• Human behavior. Evidence points to bad behavior as a major cause of wildfires. Most studies suggest that human behavior causes approximately 90 percent of the most damaging fires. Certainly, criminal behavior is difficult to eliminate, but many of these fires are caused by simple carelessness.

Each of these factors needs further elaboration, which future commentaries will address. Are there simple answers to these questions? No, if there were, they would have been determined and implemented. The path forward will require much greater public and private collaboration to find real solutions rather than continuing to apply a "Band-Aid" for an easy fix. More importantly, it is critical for insurance professionals at all levels to engage in this dialogue by providing their front-line expertise on this subject.

Takeaways

The path forward to address wildfire and other natural catastrophes will take time and continue to be contentious as we grapple with the many old and new realities addressed in this commentary. Yes, there will likely be more insurance market constrictions and premium increases. However, the urgency for working for better, realistic solutions has never been greater. Continuing down the path of temporary fixes that do not address the underlying wildfire causes is no longer an option. It is time for insurance professionals to collaborate with other wildfire stakeholders to develop more effective solutions.

How should this collaboration evolve? Here is a possible initial plan of action.

• Agree on a standard wildfire definition with all stakeholders.
• Advocate for a systematic hazard prevention and enterprise risk management process to develop realistic systemic or individual measures to reduce the wildfire exposure and damage on both a macro and micro perspective. This process should continually monitor and review the ever-changing wildfire landscape and make changes as necessary.
• Agree on best practices and standards of mitigating and hardening structures from the effects of wildfire, and develop meaningful incentives to implement them.
• Develop better methods of communication to continually educate our customers and public officials on how wildfire impacts each of us, whether we live in a wildfire-prone area or elsewhere.

The eventual goal is to develop realistic best practices at all levels to reduce the wildfire risk. As we know, it is impossible to eliminate all risks, but we need to find practical ways to manage the ones we can eliminate. Will this be easy? As with all complex issues, the path ahead is long and difficult, but failure is not an option.

As insurance professionals, we should find solace in the other historical issues for which the insurance industry played a major role in helping to mitigate boiler explosions, urban conflagrations, workplace safety, cyber risk, fire prevention, auto safety, and others. Now, it is our turn to make a difference when it comes to wildfire risk and prevention.