Global wildfire losses now account for about 10% of annual insured natural catastrophe losses. Compared with a decade ago in 2015, it was just 2%.
Fire activity is already a concern in 2026. The loss impact of fires in Q1 was much less severe than in Q1, 2025, which included the LA County fires. However, the total burned area for the whole of the US in May this year was 90% above the average for what would be expected at this point in the year, when compared with averages from 2012-2025. Globally this figure is 33% higher than the average for this period.
The escalation has been driven in part by drought conditions that fuelled fires in Georgia and Florida. While El Niño is often associated with hurricane activity, it also affects global precipitation patterns, which can in turn influence wildfire frequency and severity. With a strong El Niño forecast to emerge and persist into early 2027, wildfire risk may remain elevated into next year. As a result, the outlook for 2026 is another year of severe wildfires, potentially causing significant claims.
Wildfire is becoming more episodic, more geographically diverse, and more sensitive to how fuel sources and human activity align with the hazard at specific moments in time. That’s the lens through which a panel of experts discussed changing wildfire risk during the webinar Wildfire risk in 2026: From hazard to loss. Delivered by Willis Re and the Willis Research Network, the webinar featured:
- Dr. Megan Hart, Head of Data & Analytics for North America at Willis Re
- Dr. Matthew Jones, Associate Professor at the Tyndall Centre for Climate Change Research, University of East Anglia
- Stephen Bennett, Head of Climate and Catastrophe Science at Mercury Insurance
Dr. Daniel Bannister, Weather and Climate Risks Research Lead at Willis Research Network, acted as moderator.
Matt Jones set the scene by declaring that the world is experiencing: “really drastic, fundamental changes in the global geography of wildfire”. Fires are burning more intensely, consuming more vegetation, and releasing more energy and greenhouse gases, he explained. They’re increasingly encroaching upon the built environment. That has the potential to cause unusual and historically unprecedented economic damages.
Jones described the emergence of “hydroclimatic whiplash”. This phenomenon happens when droughts, which have increased in frequency and intensity as the climate has warmed, are followed by periods of heavy rainfall, which are intensifying because warmer air holds more moisture. Excessive stocks of vegetation accumulate in the wet periods, followed immediately by periods of very dry conditions and extreme drought, causing soil moisture to drop.
Hydroclimatic whiplash turns the environment into a tinderbox.
“The real crack of the whip is when periods of extreme vapour deficit arrive,” Jones explained. “Vegetation rapidly dries and becomes extremely flammable. We saw this effect during last year’s LA wildfires.”
A fundamental change to the geography and nature of fires on planet Earth is occurring, Jones declared, and beneath it lies an irony. “There’s a global trend towards a reduced total extent of wildfires”, he said. “We see it mostly in the savannah regions of the planet, as agriculture expands.” Thus, human activity is reducing the incidence of wildfire in some regions, but – fuelled by climate change – it is increasing it in others.
Megan Hart highlighted higher severity of losses, both in terms of event footprints in populated areas and the damage within them. “That’s due to the growth of exposure in high-risk areas”, she said. “We’re seeing a lot of high-value exposure in the wildland-urban interface, the WUI.” The frequency of property losses in the WUI is higher, as is the severity of impacts on individual properties.
Much of the exposure, especially in California and in Australia, is very high value and highly concentrated, Hart warned. “The Paradise fire affected large, high-value homes built very close together.” Meanwhile, she said, rebuild costs are rising due to materials and labour inflation, which exacerbates insurance costs.
But wildfire impacts are much broader than direct property loss, she pointed out. “Wildfires are causing large business interruption losses and supply chain impacts,” she said, noting that casualty and liability portfolios also have significant exposure if they cover utilities, contractors, and municipalities operating in high-risk areas.
“Health and life insurers can also be impacted by wildfires”, she added, noting the loss of life in the Lahaina fires, and the impacts on human health caused by smoke inhalation. “We’re beginning to see clash across the lines of business that we hadn’t really contemplated in the past”, she concluded.
Stephen Bennett of Mercury Insurance, one of the largest homeowners insurance companies in California, said that the landscape has been changing over the past ten years, and that the change continues, but it is within the power of the community to make it change for the better.
Infinitely manageable
Wildfire is “infinitely manageable”, he suggested, “probably much easier to mitigate and manage losses from them than something like hurricane or severe convective storm.” Because of that, he said, the losses of the past decade need not be repeated, provided mitigation steps are taken.
“We could draw a parallel with Hurricane Andrew”, he suggested. “Building codes and regulations in Florida were adjusted following that event. The insurance and reinsurance landscape began to adapt and adjust. Some of the biggest innovations that we’re seeing in California today are around mitigation and resilience.”
Risk management must occur where natural fuels – trees, brush, and grass – intersect with the urban fuels in WUI neighbourhoods. “We can manage the connection between natural fuels and the built environment by hardening homes and creating defensible space that limits flames’ ability to reach the first house on the edge of the neighbourhood,” Bennett said. “Because once a house begins to burn, it becomes its own source of fuel for the fire.”
Ember accumulation is another risk that can be easily managed. Embers sometimes travel through vents into attics and ignite houses. “It’s another risk that’s infinitely preventable simply by putting some screening over vents.” Finally, when new homes are built, they can be constructed differently, with fire-resistant material. Bennett recommended the advice and testing-based standards available from the Insurance Institute for Business & Home Safety (ibhs.org).
From house to house, insurers need to incentivise communities to take the actions necessary to protect the area of transition from wild land to the built environment, then to protect the community within by creating a non-burnable zone around it. “We’re not going to prevent the fires from starting, but we can prevent them from spreading,” Bennett concluded.
Changing times
The Los Angeles County wildfires of 2025 caused estimated insured losses of about $40 billion. They were not just a headline wildfire loss, but a headline loss overall, globally.
“To put that into perspective”, Hart said, “global annual insured cat losses over the last ten years or so have generally been in the range of $100 to $150 billion dollars, so that event represents 25% to 40% of a full year’s loss load. That’s significant.”
It was a “clear tail event”, she said, “somewhere around a one-in-a-hundred-year return period event.” That points to a one percent annual probability of another such event (or worse) with a similar severity of loss or greater occurring in any particular year. “That’s contemplated in the models”, Hart adds. “You wouldn’t call LA County a black swan event. There was awareness it could happen.”
The assessment of event plausibility must continue to be considered over time, due to the increasing “non-stationarity” of their timing, location, and severity, she advised.
Jones agreed. “These events are becoming more possible as the climate changes,” he said, “two to three times more likely, according to some models, in the current climate versus a world without climate change.”
Looking ahead
“What’s happening in the southeast US is very unusual, a pure drought-type event”, Jones explained. Extreme droughts from July last year were not followed by the usual winter moisture recharge, when rainfall replenishes soil and vegetation. Then the drought continued. Parts of the southeast received only about a quarter of their typical climatological rainfall between mid-March and mid-April, he said.
The cause is the impact of high pressure, which has been sitting over the southeast US, held in place by “a ridge in the jet stream”. It steers away the storms that would normally bring rainfall, leaving drought to persist for nearly a year so far. “The landscape is essentially critically dry and primed to burn.”
El Niño traditionally suppresses hurricane activity in the Atlantic whilst driving more frequent wildfires in the western United States. “It usually causes wetter weather in the southeast U.S.”, Jones said, “but the strong El Niño that is looking increasingly likely to develop is the elephant in the room.”
Warmer waters are building up in the central and eastern Pacific right now, at the subsurface. “If that level of warmth rises to the surface, the atmosphere will respond with convection over the central and eastern Pacific, rather than to the west,” Jones explained. “That weakens the trade winds that drive across the Pacific, with knock-on consequences around the tropics for patterns of rainfall, temperatures, and heat.”
In the intermediate term, regions including Indonesia, northern and eastern Australia, the northern parts of Amazonia and Central America, and parts of southern Africa – those with hot, extended dry seasons – could experience those conditions extending. That tends to bring about critically dry vegetation, and therefore above-average fire seasons.
But El Niño conditions tend to have longer-term consequences. “Some regions, particularly the southern US, Peru, Ecuador, parts of southern South America, and East Africa tend to see above average rainfall during an El Niño,” according to Jones. They’re the places to watch in the years that follow. “In 2027 and 2028, these are areas where wet weather will cause more fuels to develop in the form of vegetation, creating greater potential for the whiplash effect.”
Wildfire is evolving quickly. It is essential to assess assumptions about the peril continuously through ongoing research, and by learning from events as they occur. Insurers typically use past events to understand worst-case loss scenarios, but history is definitely not representative of the bounds of wildfire.
A big thank you to our panel for sharing their expertise and perspectives on this rapidly changing risk landscape. We will be planning more of these events throughout the year; make sure you follow our LinkedIn page to keep up to date.
