Wildfires in France, Spain seen as limited threat to insurer earnings

The wildfires burning across France and Spain will probably not hit the 2026 earnings of large European insurers hard, as long as the flames stay out of major cities and industrial zones, Fitch Ratings said Tuesday.

The blazes have scorched roughly 117,000 hectares in France and more than 200,000 hectares in Spain since late July, killing several people and forcing close to 300,000 to evacuate. Still, Fitch said reported damage to structures remains low compared with past disasters.

"We would expect only modest pressure on 2026 earnings for most large European insurers, and hence no rating implications," the rating agency said. It added that the fires alone should not change the broader softening trend in property catastrophe reinsurance. Pricing might shift for high-risk zones or for insurers with weak prevention and exposure management, Fitch said.

State-backed aid offers little help for these particular events. France's CatNat scheme excludes wildfires. Spain's Consorcio only kicks in if the government designates a catastrophe as extraordinary. So private property insurance, private reinsurance and uninsured losses carry the cost, Fitch said.

Even if wildfires miss urban centers, late loss creep remains possible from smoke, farmland damage, industrial exposure or suburban spread. Domestic insurers with heavy regional property exposure face more volatility than diversified groups. But low catastrophe losses so far in 2026 left them with unused large-loss budgets at the half-year mark, Fitch noted.

Earnings targets are safe unless insured losses top EUR2 billion in either Spain or France. Business interruption claims should stay limited – evacuation or confinement orders rarely trigger coverage without direct physical damage or specific policy wording.

The current fires are far smaller than the January 2025 Los Angeles wildfires, where urban spread destroyed more than 10,000 homes and generated about $40 billion in insured losses, the costliest wildfire event on record. That disaster strained local primary insurers and California's FAIR Plan, an insurer of last resort. Strong capital and reinsurance prevented carrier failures or downgrades, though it accelerated rate hikes and insurer retreats from high-risk markets.

"Reported structure losses in France and Spain so far appear much lower, but further effects remain a risk," Fitch said. Significant areas in both countries have burned through August and September in prior years.

The fires also support Fitch's broader view that wildfire is likely to drive more weather-related claims over time, the agency said. That strengthens the case for better risk modeling, adaptation measures and risk-sharing structures that preserve underwriting capacity and affordability in climate-vulnerable areas.

For a broader look at how natural disasters shape insurance and stock market reaction, see stock market analysis and our weekly recap on how markets respond to macro shocks in Fed Holds as Amazon Surges, Apple Slumps: Weekly Recap.