The potential insured losses resulting from U.S. wildfires are growing even as their frequency decreases because close to 99 million Americans reside in the wildland urban interface (WUI), according to the Insurance Information Institute (Triple-I).

“Insured losses are influenced by the extent of development in the wildland urban interface,” said Dale Porfilio, chief insurance officer, Triple-I, upon publication of the organization’s latest Issues Brief, Wildfires: State of the Risk. “Developers, homebuyers, lenders, and other stakeholders must seek to understand and respond appropriately to the relationship between a property’s WUI proximity and its risks.”

The WUI is the zone of transition between unoccupied and developed land, where structures and human activity intermingle with wildland and vegetative fuels. More than 46 million homes with an estimated cumulative value of $1.3 trillion are situated within the WUI, the U.S. Fire Administration reported in 2022. In a report published in March 2023, and cited in Triple-I’s Issues Brief, the Swiss Re Institute said, “another longer-term trend is the doubling of the share of natural catastrophe insured losses from wildfires over the last 30 years.”

The correlation between wildfire risk and geography underscores the importance of data gathering and scrupulous analysis when insurers underwrite and price their auto, business, and homeowners policies.

“Even within states that are heavily exposed to wildfire risk, potentially profitable insurance opportunities exist. The use of sophisticated modeling tools is critical to sound, accurate underwriting,” Porfilio stated.

The August 2023 wildfires in Hawaii were among the deadliest in U.S. history, yet this year the nation is on track to have its fewest number of wildfires dating back to 2014. The total number of U.S. wildfires has generally been on a downward trajectory over the past decade except for 2017 and 2018. The latter years were when the nation’s three costliest wildfires, as defined by insured losses, occurred in California.

Since that time, state and local authorities have invested heavily to mitigate the human causes of wildfires, the Triple-I’s Issue Brief notes. In addition, the federal Infrastructure Investment and Jobs Act of 2021 included billions of dollars to support wildfire-risk reduction, homeowner investment in mitigation, and improved responsiveness to fires.

The private sector also has played a role in reducing wildfire risks. For instance, the Insurance Institute for Business & Home Safety (IBHS), which is financially supported by insurers and provides science-based wildfire research, launched its Wildfire Prepared Home designation program in 2022 to help California homeowners protect their property, according to Triple-I’s latest Issues Brief.

About the Insurance Information Institute

With more than 50 insurance company members — including regional, super-regional, national, and global carriers — the Insurance Information Institute (Triple-I) is the #1 online source for insurance information in the U.S. The organization’s website, blog and social media channels offer a wealth of data-driven research studies, white papers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.

Unlike other sources, Triple-I’s sole focus is creating and disseminating information to empower consumers. It neither lobbies nor sells insurance. Triple-I offers objective, fact-based information about insurance – information that is rooted in economic and actuarial soundness. Triple-I is affiliated with The Institutes Risk and Insurance Knowledge Group.

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"Even within states that are heavily exposed to #wildfire risk, potentially profitable #insurance opportunities exist. The use of sophisticated #modeling tools is critical to sound, accurate #underwriting." - Dale Porfilio, CIO @iiiorg