In the 2023 US Wildfire State of the Market report, ICMIF Supporting Member Gallagher Re provides an analysis of the evolving risk factors that contribute to wildfire losses, and the resulting distressed insurance and reinsurance market dynamics for 2023. The report gives a rundown of last year’s wildfire season, as well as commentary on causes, effects and market conditions.

Wildfires continue to pose a significant threat to an already fragile insurance and reinsurance market given recent profitability challenges, according to the report. An extended wildfire season has become a daunting reality for many regions across the USA.

Readers of this report can expect to:

• Review 2022 US wildfire season and overall financial loss perspective
• Understand the evolving risk of wildfires and factors leading to current market dislocation
• Learn how insurers can better manage their wildfire risk given rapidly evolving market dynamics

The report finds that while the number of acres burned in the 2022 wildfire season was consistent with the long-term average, concerns remain at an all-time high about wildfires and the potential damages that come as a result. A key factor in the threat of wildfires is climate change, which increases the likelihood of fires. Also, homes continue to be built further into areas that cross the boundary between wilder areas and more urbanised areas which increases the likelihood of losses and subsequent insurance claims.

According to the report, recent years have experienced particularly devastating losses, altering the perception of wildfire risk and leading to changes in how it is managed and therefore priced by insurers. The recent market dislocation, the report’s authors believe, signals a new focus on managing wildfire risk.

The report also examines how leveraging technology to understand and manage wildfire risk effectively has become vital for insurance companies that are seeking to write profitable business in wildfire-prone areas. To combat these challenges, Gallagher Re offers its clients an array of analytical tools and insights to tackle the intricacies of pricing, underwriting and portfolio management in the midst of a rapidly transforming environment.