Wildfire Losses Grow 12% Annually, Outpacing All Perils: What Swiss Re's Sigma 1/2026 Means for P&C Pricing

Swiss Re's sigma 1/2026 puts 2025 global nat cat insured losses at $107 billion, below the long-term trend. The more consequential number in the report is smaller and less quoted: wildfire insured losses are growing at an estimated 12% per year, the fastest of any peril in the sigma database, ahead of severe convective storms, flooding and tropical cyclones. That figure has to survive contact with a rate filing cycle.

Key Takeaways

• 12% annual growth in wildfire insured losses is the fastest rate in the sigma series. The report does not state the underlying period or whether the figure is inflation-adjusted.
• $40 billion insured against $65 billion economic for the January 2025 Palisades and Eaton fires, more than triple the roughly $12 billion of the 2018 Camp Fire and the largest wildfire event in Swiss Re's records.
• A $100 million wildfire AAL becomes $311 million in ten years at 12% compounding, which is the gap a rate filed on a trailing average is required to close.
• The California FAIR Plan holds 684,388 policies and $750 billion of exposure as of March 2026, up 152% and 242% respectively since September 2022, and new business is running at roughly 16,500 policies a month.
• An 85% write-back commitment is the condition attached to using approved catastrophe models in California, which concentrates carriers in exactly the geographies where the 12% trend is steepest.

What the 12% Does and Does Not Say

Swiss Re identifies wildfire as the fastest-growing risk at an estimated 12% per year. Three qualifications belong on it before it enters a model.

The report does not state the period the estimate covers, and it does not say whether the figure is inflation-adjusted. On standard sigma methodology, tracking nominal insured losses against a normalized baseline, the number carries both real escalation and rebuilding cost inflation. Even allowing 3 to 4 points for construction cost inflation, the residual 8 to 9 points of real growth still exceeds the trend in every other secondary peril.

There is also no published confidence interval, and wildfire is the peril least suited to a point estimate. A single event dominates the annual total: the Palisades and Eaton fires produced roughly $40 billion of insured loss against $65 billion economic, implying 60 to 70% penetration, and more than tripled the roughly $12 billion of the 2018 Camp Fire. Year-to-year variance around a 12% line is wider than for severe convective storms, which get frequency and geographic dispersion in their favor.

The 2025 composition shows why the aggregate is misleading in the other direction. Secondary perils drove a record 92% of global nat cat insured losses, with severe convective storms near $51 billion, wildfire at $40 billion and floods at just $3.4 billion against a five-year average of $15.4 billion. Balz Grollimund, Swiss Re's Head of Catastrophe Perils, attributed the below-trend total to favourable variability rather than any easing of underlying risk. A year with a major US hurricane landfall inverts that share without changing the wildfire trend at all.

Twelve Percent Compounding Against a Twelve-Month Filing Lag

The arithmetic is what makes this an actuarial problem rather than a climate observation.

Year	Projected AAL ($M)	Cumulative Increase
Year 0 (base)	$100	--
Year 3	$140	+40%
Year 5	$176	+76%
Year 7	$221	+121%
Year 10	$311	+211%

A carrier pricing to a $100 million wildfire average annual loss today faces $311 million within a decade if the trend holds. Rate increases tracking general inflation but not wildfire-specific escalation produce systematic inadequacy inside three to five years.

The filing cycle amplifies it. Most states allow annual filings, but review and approval runs six to twelve months or longer, and under California's Proposition 103 framework the historical lag has been longer still. A 10% increase filed to cover projected wildfire loss can be behind the trend before it takes effect, and each inadequate year adds to an accumulated shortfall that requires a larger single-year catch-up. The California FAIR Plan's 35.8% increase effective April 2026, the first to use forward-looking catastrophe models, shows both the size of the correction and the resistance it draws.

The same trend breaks the calibration underneath the rate. A model fitted to the trailing five or ten years understates prospective loss unless the growth is explicitly loaded forward. The backward-looking twenty-year average that Proposition 103 required is worse: at 12% growth, the most recent year carries roughly ten times the loss of the year twenty years earlier, and averaging across that range produces a rate adequate for neither end.

California's Sustainable Insurance Strategy addressed this. The Department of Insurance approved Verisk's US wildfire model in late July 2025 and KCC's Reference Model Version 3.0 in early August, with Mercury filing the first cat-model-based application at 6.9% that same month. The condition attached is the complication: carriers using the models must write at least 85% of their statewide market share in wildfire-distressed areas. That is a deliberate concentration requirement in the geographies where the 12% is compounding fastest.

The Market Is Clearing Through the Residual Mechanism

Where price cannot move fast enough, capacity moves instead, and the California FAIR Plan is the measurement of how much.

As of March 2026 the plan reported 684,388 policies in force, $750 billion of total exposure and $2.02 billion in written premium. Since September 2022 that is growth of 152% in policies, 242% in exposure and 208% in premium. New business in the first half of fiscal 2026 reached 98,677 policies, roughly 16,500 a month, and the pace has not decelerated despite the Sustainable Insurance Strategy reforms.

The displacement behind those numbers is specific. State Farm stopped accepting new property applications in May 2023 and announced non-renewal of approximately 72,000 policies in March 2024. Allstate halted new homeowners business in 2023. Farmers paused for over a year before resuming in December 2024. Each withdrawal moved policies into the residual market.

That is where the cost returns to carriers that declined the risk. FAIR Plan assessments are levied on all admitted property insurers in California in proportion to market share. A carrier that non-renewed its wildland-urban interface book still holds a share of the exposure it shed, priced not by its own underwriting but by the plan's, and growing at 242% since 2022. The peril is not being priced out of the market so much as re-pooled at a level no individual rate filing controls.