Wildfires sweeping across Spain and France are set to push up claims for French insurers, even as the broader fiscal impact on regional and local governments in both countries remains limited, according to a new sector comment from Moody's Ratings.
The rating agency said more than 175,000 hectares of land had burned in Spain and France in the week to 29 July, an area equal to 40% of the total burned across both countries in all of 2025.
The fires, driven by intense heatwaves and prolonged drought, have forced evacuations of more than 115,000 people in Spain and over 200,000 in France, with the largest ongoing blaze concentrated in Gironde, near Bordeaux Métropole.
Moody's said the wildfires would result in higher claims for French insurers, with losses likely to fall primarily on insurers and their private reinsurance programmes rather than the state-backed Cat Nat regime administered by Caisse Centrale de Réassurance, since forest fires are generally excluded from that scheme.
The agency expects the additional costs to be manageable for most French insurers, with limited impact on earnings and capital given existing reinsurance cover.
Moody's expects support from national governments, the European Union's Civil Protection Mechanism and private insurance coverage to absorb much of the immediate cost and support recovery, even as the scale of the damage remains uncertain.
The episode has landed at a moment when UK insurers are already reassessing their own wildfire exposure. Spain's 2025 fire season, its worst in three decades, burned almost 355,000 hectares and caused close to €5 billion in economic losses, yet well under €1 billion in insured payments, a gap Morningstar DBRS has said illustrates how far exposure can outrun coverage when a peril remains poorly modelled.
For the UK, wildfire has traditionally sat behind subsidence and flood in underwriting priority, but that is starting to shift. The Prudential Regulation Authority launched its General Insurance Stress Test in May 2026 to press firms on climate-driven property exposure, while Deloitte has forecast that UK home insurers will swing to a net underwriting loss this year, with the combined ratio reaching 102.1% as storm, flood and subsidence claims continue to build.
The Environment Agency has recorded 110 wildfires on Sites of Special Scientific Interest this year, and the ABI has confirmed UK subsidence claims reached £153 million in the first half of 2026, with insurers including Ecclesiastical flagging the combined subsidence and wildfire exposure building across drought-affected regions.
Brokers have echoed that concern. Willis Research Network's weather and climate risks research lead, Daniel Bannister, has said the UK remains under-assessed for wildfire risk even though local conditions differ from those driving the Spanish fires, pointing to gaps in modelling and risk mapping that leave insurers and businesses exposed.
Globally, reinsurers head into this wildfire season from a position of strength. Global reinsurance capital reached a record US$790 billion at the end of the first quarter of 2026, and property catastrophe buyers secured double-digit price reductions at the June and July renewals, helping insurers absorb moderate wildfire losses without material strain on capital. DBRS has cautioned that wildfire tends to behave as a frequency and aggregation problem rather than a single peak event, meaning multiple medium-sized fires can erode annual catastrophe budgets even without a single loss breaching a high excess-of-loss layer.
"Actively evaluating" is how Aon's global head of climate risk consulting, Will Bruce, described the industry's assessment of whether this summer's heat marks a lasting shift in Europe's catastrophe risk landscape, a question with direct implications for how London market underwriters and Lloyd's syndicates price European property and reinsurance business heading into 2027 renewals.
Moody's said it expects national governments to bear a significant share of the burden through funding for civil security, military and firefighting operations, along with recovery assistance where needed, limiting the direct fiscal impact on regional and local authorities. The Madrid regional government has already announced a €30 million aid package for housing and recovery, equivalent to just 0.1% of its budget. Bordeaux Métropole has so far avoided significant direct fire damage, though it has faced precautionary evacuations and smoke-related disruption.
In Spain, the fires are concentrated in Castilla y León, Castilla-La Mancha, Madrid and Valencia, with around 128,000 hectares affected. Valencia was flagged as particularly exposed given its debt-to-operating-revenue ratio of 290% at the end of 2025, well above the 148% average for Moody's-rated Spanish regions.
For insurers on both sides of the Channel, the episode adds to a growing body of evidence that wildfire risk in Southern Europe is both more frequent and more widespread than in previous decades, a trend likely to feed into how UK-based reinsurance programmes and catastrophe models are priced going forward.
