Key facts
- Nearly $1.4 trillion in reconstruction cost value is at risk from wildfires across 10 western states.
- Over 2.5 million properties are exposed to moderate or greater wildfire damage.
- California leads in exposure with 1.28 million properties valued at $850 billion.
- Conflagration risk, the spread of fire between structures, is a significant factor in new risk assessments.
- Properties with high mitigation scores have significantly lower expected losses compared to those with low scores.
A new report from Cotality reveals that over 2.5 million properties across 10 western U.S. states face a moderate or greater risk of wildfire damage, with an estimated reconstruction cost value of nearly $1.4 trillion. The analysis, released Wednesday, emphasizes the growing threat of conflagration, where fires spread from structure to structure, a factor traditional wildfire models may understate.
California bears the largest exposure, with 1.28 million properties valued at $850 billion. However, nearly half of all at-risk properties are located outside California. Colorado and Texas combined account for approximately 560,000 at-risk properties and $252 billion in reconstruction cost value, nearly matching the exposure of the seven other most affected states.
At the metropolitan level, Los Angeles leads with nearly 250,000 at-risk properties and $209 billion in reconstruction cost value. Outside of California, Austin, San Antonio, Denver, and Spokane, Washington, are among the top 10 most exposed metros.
Cotality's modeling incorporates conflagration potential, which can add significant risk to properties previously considered low-risk. This granular data could influence mortgage underwriting, pricing, and capital decisions. Jamie Knippen, Cotality's director of hazard insights, stated that this enhanced data allows for more effective property protection and rewards homeowners who invest in resilience.
The report also introduces a property-level mitigation score. Homes in the top 10% for mitigation have expected losses approximately 78% lower than the statewide average, while those in the bottom 10% face more than 10 times the average expected loss. This highlights the impact of measures like defensible space and fire-resistant building materials.
These findings have significant implications for insurers, who are already grappling with rising catastrophic losses and reinsurance costs. More detailed property-level data can enable insurers to refine underwriting and pricing, potentially moving away from broad market withdrawals. For lenders and investors, understanding insurance availability and mitigation status at the property level is becoming increasingly crucial, especially in rapidly growing areas with rising exposure.