The ongoing fires in France and Spain are expected to have a limited impact on the 2026 earnings of large European insurers, provided the fires do not spread into major urban, residential, or industrial hubs, according to a recent Fitch Ratings report.
The fires have burned around 117,000 hectares in France and over 200,000 hectares in Spain as of late July, causing several fatalities and nearly 300,000 people to be evacuated.
Despite the destruction, reported structural damage remains low compared to historical benchmarks. Barring urban spread or multiple follow-on events, especially near major cities like Bordeaux or Madrid, Fitch expects only modest pressure on insurers’ 2026 earnings.
The rating agency stated: “We would expect only modest pressure on 2026 earnings for most large European insurers, and hence no rating implications. Nor do we expect this event alone to change the broader softening trend in property catastrophe reinsurance. Pricing may become more differentiated for high-risk areas or for cedants with weaker prevention and exposure management.”
State-backed compensation schemes offer minimal support for these specific events. In France, wildfires are excluded from the CatNat scheme, while Spain’s Consorcio coverage only applies if an event is designated as extraordinary.
As a result, Fitch noted, private property insurance, private reinsurance, and uninsured losses remain the main channels of loss allocation.
Even if wildfires avoid urban areas, late loss creep remains possible via smoke, agricultural impact, industrial exposure, or suburban spread.
While domestic insurers with high regional property concentration face more volatility than diversified groups, low natural catastrophe losses left them with unused large-loss budgets at end-1H26.
Consequently, 2026 earnings targets are unlikely to be at risk unless insured losses exceed EUR2 billion in either Spain or France. Business interruption claims should also be limited, as evacuation or confinement orders rarely trigger coverage without direct physical damage or specific policy terms.
The current situation contrasts with the January 2025 Los Angeles wildfires, where urban spread destroyed over 10,000 homes and generated roughly $40 billion in insured losses, the costliest wildfire event on record.
While the California fires strained local primary insurers and the state’s FAIR Plan – an insurer of last resort -, strong capital reserves and reinsurance prevented carrier failures or rating downgrades.
However, that event accelerated rate hikes and insurer retreats from high-risk markets.
Fitch emphasised: “Reported structure losses in France and Spain so far appear much lower, but further effects remain a risk. Significant areas in both France and Spain have been affected by wildfires through August and September in previous years.”
Concluding: “The fires also support Fitch’s broader view that wildfire is likely to become a larger driver of weather-related claims over time. This underpins the case for innovation to strengthen insurers’ natural catastrophe resilience through better risk modelling, adaptation measures and risk-sharing structures that help preserve underwriting capacity and affordability in climate-vulnerable areas.”
