Insuring Wildfires Globally

Mary Kelly () and Zhe Peng ()
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Mary Kelly: Wilfrid Laurier University
Zhe Peng: Property and Casualty Insurance Compensation Corporation (PACICC)

A chapter in Handbook of Insurance, 2025, pp 123-167 from Springer

Abstract: Abstract This chapter provides an overview of the increasing risks posed by wildfires globally and the role of insurance in protecting against wildfire losses. Wildfires cause agricultural and timber losses, losses to structures and infrastructure, revenue losses due to business interruptions, loss of tourism dollars, and significant indirect losses. Wildfires, and in particular wildfire smoke, also create significant health impacts. Although insurance remains an important tool in supporting economic recovery after a wildfire, a better solution is preventing wildfires from growing into dangerous fires that threaten people and property. Since wildfires cannot be avoided, investments in suppression, as well as mitigation by communities and individual property owners, are essential, and insurance can play a role in incentivizing mitigation activities. Climate change, land use decisions under the backdrop of wildland-urban interface (WUI) expansion, growing urbanization, and an increase in accumulated assets all contribute to growing wildfire losses. Private property-casualty insurers typically cover property losses from wildfires. But given the global increase in losses, significant concerns have been raised about the insurability of such losses in the future, especially in fire-prone California and Australia. Some recommendations to expand capacity and provide sufficient compensation after a wildfire loss are provided.

Keywords: Wildfire; Climate change; Insurance (search for similar items in EconPapers)
JEL-codes: G22 Q54 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/978-3-031-69561-2_5

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