Europe's Insurers Warn Wildfire Costs Will Reshape Premiums

“We are now all exposed to all kinds of weather-related hazards,” said Stephanie Duraffourd, a spokesperson for Assurland, one of France’s largest online insurance comparison websites. “No region is spared.”

Risk levels will be reassessed, Duraffourd said. There will be “more significant premium increases locally, this also applies to the entire country.”

Roland Lescure, the French finance minister, has said insurers will cover the cost of temporary housing for thousands evacuated due to wildfires. The decision, negotiated with France Assureurs, applies whether homes were damaged or not.

Historical data no longer provide an adequate foundation for loss probabilities. The industry now relies “heavily” on forward-looking scenario analysis, Aon’s Bruce said. Europe’s ability to generate reliable catastrophe risk models will play a key part in attracting investors to products such as cat bonds, he added.

Catastrophe bonds help insurers offload unmanageable risks to capital markets. Investors are on the hook if a predefined catastrophe hits. They profit if it does not. They only invest with reliable data to base their bets.

Last year, the California FAIR Plan – the state’s insurer of last resort – entered the cat bond market with a wildfire bond after the January 2025 fires that devastated the Los Angeles area. The FAIR Plan faced an estimated $4 billion in losses.

Globally, more than $5 billion of cat bonds with some exposure to wildfire risk were issued by insurers and sold to investors last year. That is more than double the 2024 level.

Swiss Re Institute notes wildfire is now the fastest-growing weather peril globally. “Additional risk-transfer capacity cannot replace measures that reduce the underlying risk to keep insurance affordable,” said Balz Grollimund, Swiss Re’s head of catastrophe perils.

Wildfire risk is not currently covered under state-backed public-private natural disaster compensation frameworks in Spain or France. That carries implications for how easily insurers can transfer risk, said Manuel Arrive, a credit analyst at Fitch Ratings.

“The question that arises is whether the state-backed natural catastrophe scheme should be extended to cover wildfires or other perils related to climate change,” Arrive said. “In any case, there is a willingness on the part of European insurers to do so.”

With climate-related losses expected to double every eight to nine years, Allianz’s Trüstedt says Europe now “urgently” needs to focus on protecting against losses in the first place, “rather than simply redistributing losses after they occur.”