A little over a year after the record-breaking 2025 Los Angeles wildfire sequence, reinsurance specialists warn that California’s wildfire story has fundamentally changed, and brokers should expect carrier strategy, appetite, and pricing to evolve with it.
New analysis from Gallagher Re shows that insured wildfire losses are no longer overwhelmingly concentrated in Southern California. Instead, Northern and Southern California now account for roughly equal shares of average annual industry loss.
The shift signals a property market that is becoming more granular and more dependent on catastrophe modeling than at any time in the state’s history.
According to Toby Hardman (pictured), executive vice president at Gallagher Re, the rebalancing is driven by a combination of warming conditions and decades of fire suppression that have altered fuel loads, especially in Northern California.
“I wouldn’t say there’s a real equalization of risk,” Hardman told Insurance Business. “While large events could be anywhere in California, our overall view is that there’s a higher chance that the bigger industry losses – the multi-billion dollar events – will likely come from Southern California.
“But in totality, if you look at the aggregation of wildfire losses to the insurance industry over time, and especially over about the last decade, you’ll see a more even split than you’ve had in the past.”
Southern California continues to hold roughly twice the exposure in high and extreme wildfire zones compared with the north, and its maximum loss potential remains significantly higher. But over the past decade, escalating Northern California fire frequency and size have pushed its contribution to total industry losses close to parity.
Hardman attributed this to a combination of changing weather patterns, including warmer conditions, and the human element in how we use fire suppression.
“Between those two dynamics, while you’re seeing an increase in risk in both Northern and Southern California from temperature, the suppression element has a bigger and more dramatic implication on Northern California,” he noted.
Historically, many carriers focused their wildfire management efforts on limiting their risk concentration in Southern California. Hardman said that approach is now outdated. Carriers are now increasingly evaluating risk at the individual policy level and then testing how each risk contributes to portfolio accumulation. This hyper-granular approach is directly tied to reinsurance pricing, he said.
This is because the more precisely an insurer can demonstrate its accumulation control, the more competitive its reinsurance financing becomes, a cost ultimately borne by insureds. As a result, brokers may see sharper underwriting questions, tighter geocoding requirements, and more selective appetites even within the same ZIP code.
Hardman expects widening performance gaps between carriers based on how well they manage this technical discipline. “(Carriers) have to be very good at selecting which policies are the better policies in terms of wildfire potential and how that accumulates with your portfolio. That’s not easy. You’re going to see a pretty big divergence in results,” he said. “Stakeholders, (including) reinsurers and rating agencies, are extremely focused on making sure carriers end up on the better side of that spectrum.”
Recent reforms to Proposition 103 are accelerating the industry’s pivot toward forward-looking risk management. Insurers can now incorporate catastrophe models and reinsurance costs into pricing, a major departure from the historical reliance on backward-looking averages.
Hardman called it a turning point. “There is a huge focus right now, like never before, on using the right tools to evaluate wildfire loss and making sure aggregation and financing costs are evaluated at the policy level before a policy is written,” he said. Carriers that integrate modeling directly into underwriting workflows are positioning themselves to grow, but selectively.
Mitigation is becoming another differentiator. Insurers are increasingly rewarding defensible space, hardened construction, and community-level resilience measures. Brokers who understand and document insureds’ mitigation efforts may unlock access to markets that would otherwise decline to write.
The expansion of the California FAIR Plan and the growth of the excess and surplus market have reshaped expectations during the property capacity crunch.
As admitted carriers cautiously return, Hardman believes success will hinge on achieving adequate (but not excessive) returns and on embracing diverse views of wildfire risk.
Unlike perils such as hurricane or hail, he said, wildfire modeling outputs vary widely between tools. This variability creates opportunities for carriers with differentiated analytics to offer competitive pricing on specific risks, and fosters diversification to California’s challenging property market.
“The more supply that comes in, the more competitive it gets, and that drives down prices. That’s true, and it’s a good thing,” Hardman said. “The part that is sometimes overlooked – and which is different about wildfire – is that as you bring in more carriers, it’s not just more capacity; it’s different views of risk.
“From a consumer perspective, if you can bring in more capital with carriers that have meaningfully different views of what the loss potential could be, ultimately, you’re going to bring in some carriers that offer meaningfully lower prices for certain risks. That can help deliver a long-term solution.”
