Lessons for European insurers from California’s $40bn wildfire losses: Swiss Re

Swiss Re, a reinsurance provider, has drawn on its expertise in natural catastrophe risk to identify critical lessons from California’s wildfire experience that are increasingly relevant for insurers across Europe.

The growing frequency and intensity of wildfires worldwide—driven by climate shifts, land-use changes, and human activity—signal a rising exposure for the European insurance sector.

Drawing on data, claims experience, and risk modelling insights, Swiss Re outlines how European insurers can better anticipate, mitigate, and manage wildfire-related losses by learning from events in the United States, particularly California.

In January 2025, Los Angeles County faced two major wildfires that destroyed over 16,000 structures and burned more than 30,000 acres. This event, which Swiss Re estimates caused approximately USD 40 billion in insured losses, has become one of the costliest wildfire disasters ever recorded.

Unusually dry and warm conditions, compounded by prolonged Santa Ana winds and stretched firefighting resources, turned what might have been a contained risk into a catastrophe. By May, wildfire-related insured losses globally had already exceeded the highest previous annual totals, according to Swiss Re analysis.

Swiss Re has been closely monitoring wildfire developments in Europe, where conditions are changing rapidly. The European Environment Agency has identified Europe as the fastest-warming continent, with wildfires projected to become more frequent and intense, even under relatively optimistic climate scenarios.

Past events already point to this trend: devastating wildfires in Portugal in 2017, fires near Athens in 2024, and urban blazes in London during the 2022 heatwave are just a few examples.

Data from the European Forest Fire Information System show a clear increase in both the number and scale of fires across the region. Swiss Re warns that historical indicators suggest countries such as France, Italy, Portugal, Spain, and Greece could face wildfire events resulting in economic losses exceeding EUR 2.5 billion.

Swiss Re’s findings stress that one of the most pressing challenges lies in the continued development in what is known as the wildland-urban interface (WUI)—areas where buildings and wild vegetation meet.

In California, the number of homes in these high-risk zones grew by 23% over three decades, increasing both the exposure to fire and the risk of ignition. In Europe, similar development patterns are visible. For instance, in Portugal, over 60% of industrial zones are located close to woodland areas prone to fire.

Swiss Re underlines the need for European policymakers and urban planners to rethink development in fire-prone zones and to avoid repeating patterns seen in high-loss regions like California.

Affordability and availability of insurance coverage are also emerging as key concerns. In California, escalating wildfire risks have made insurance pricing and regulatory compliance increasingly difficult, pushing some insurers to withdraw from high-risk areas.

Swiss Re data indicates that in the EMEA region, the protection gap for natural catastrophes stood at 70% in 2024—far higher than the 43% gap in the United States.

Swiss Re emphasises that to maintain insurability in high-risk zones, prices must reflect the full spectrum of wildfire-related costs, including more frequent and severe events. Targeted subsidies may be necessary to ensure vulnerable populations can still access insurance, particularly in countries like Greece and Portugal where wildfire risk coincides with relatively low insurance penetration.

The complexities of wildfire modelling present another challenge for insurers. Swiss Re highlights that unlike many other natural perils, wildfires are heavily influenced by human factors, including ignition sources, land management practices, and building design.

Traditional risk models often fail to account for these intricacies. Swiss Re has been investing in more advanced risk assessment tools to address this gap. Its proprietary platform, CatNet®, integrates granular data—including topography, historical fire patterns, and climate projections—to map potential wildfire hotspots across Europe.

In addition, Swiss Re’s partnership with Bellwether is enabling location-specific wildfire probability forecasts based on over 600 geospatial data layers. While currently available in North America, there are plans to extend these capabilities to Europe, providing insurers with more refined insights to support underwriting and risk selection.

Swiss Re also underscores the importance of addressing accumulation risk—where insurers hold significant exposure in a concentrated area prone to wildfires. This risk is particularly acute in regions with high population density and growing exposure to climate-driven perils.

Working with its insurance partners, Swiss Re advises on how to evaluate and diversify portfolios, establish clear coverage terms, and implement strict accumulation controls to avoid disproportionate losses from a single catastrophic event.

Another key takeaway from the California wildfires relates to the complexity of wildfire-related claims. Swiss Re’s claims experience shows that wildfire events often lead to costs beyond direct fire damage.

Displacement expenses, smoke and ash contamination, secondary effects like landslides, and legal liabilities all add to the financial burden. In California, unique legal frameworks allow subrogation against utilities even without proven negligence, reducing the loss load on property insurers.

While this legal doctrine is not common in Europe, Swiss Re points out that subrogation is still possible and may become more relevant as wildfire litigation becomes more sophisticated. However, outcomes are uncertain and often require years to resolve.

Preparedness and prevention are two areas where Swiss Re believes Europe can act more decisively. Historically, both in the US and in Europe, response strategies have prioritised suppression over prevention. However, the growing scale and frequency of fire outbreaks increasingly demand proactive risk reduction.

Swiss Re has observed positive policy shifts, such as Portugal’s post-2017 legislation mandating vegetation clearance and supporting forest maintenance.

Yet, enforcement remains inconsistent across many European countries due to resource constraints. Swiss Re recommends that prevention become a more central component of wildfire risk strategy, with insurers, governments, utilities, and communities working in coordination.

Finally, Swiss Re emphasises that rebuilding efforts after a wildfire should prioritise resilience. Too often, reconstruction focuses on speed rather than long-term protection. Lessons from California have shown that rebuilding without changes in design or planning standards can lead to repeated losses.

Swiss Re advocates for stronger building codes, revised zoning practices, and the use of fire-resistant materials in vulnerable areas. Insurance pricing can support this by sending clear signals about risk levels, guiding future development decisions.

While Europe’s current exposure may still be moderate compared to the US, all indicators suggest that this risk will escalate.

By applying insights from California and leveraging tools developed by Swiss Re, European insurers can strengthen their resilience and help protect communities across the continent.

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