The main drivers of rising flood losses are related to economic growth and urbanization. Coastal development puts more property at risk and eliminates ways for water to flow or to be absorbed. Other factors – such as aging or absent flood-control infrastructure – also affect losses. Extreme weather and rising sea levels exacerbate the threat.

While awareness of weather and climate risk has grown in recent decades and much action is being taken, a lot of work remains to establish a mindset focused on resilience and pre-emptive mitigation.

Wildfires play a complex role in overall climate risk that insurers need to understand and develop strategies to address. Traditional risk transfer isn’t sufficient to address these chaotic, interconnected perils – but ceasing to insure complex risks isn’t a strategy for long-term success. What’s needed are risk reduction, pre-emptive damage mitigation, and a deeper understanding of the evolving nature of this hazard. Insurers are well positioned to lead the way.

The 2017 and 2018 wildfire seasons were a catastrophic shock to communities, legislators, and insurance companies. This was most evident in California, which suffered the largest and most destructive wildfires in state history. The aftermath of these disasters has led to the question of whether catastrophic wildfires will be the new normal for California and other fire-prone states and, if so, what can be done to mitigate them?

Executive summary

• The exposure value of the residual property market in hurricane-exposed states continues its decline from the peak levels seen in 2011. Between 2011 and 2014, total exposure to loss in the plans fell by almost 30 percent to $639 billion. Policy counts in 2014—at around 2.8 million—are also down from their 2011 highs.