Global reinsurance broker Guy Carpenter, a Marsh business, says the latest wave of wildfires across southern Europe highlights how wildfire risk is becoming a broader resilience challenge, with the economic consequences increasingly extending beyond direct property damage.
Although the scale of the fires has been significant, Guy Carpenter said insured losses have so far remained relatively contained because many affected areas are rural and have lower levels of property exposure.
However, the company warned that the risk profile could change quickly if fires move into more densely populated locations, where higher concentrations of residential and commercial property could lead to significantly greater insured losses.
Julian Enoizi, CEO of Europe at Guy Carpenter, commented: “The current fires reinforce two important trends. First, today’s insured losses remain relatively contained because many of the fires have affected rural areas, but that picture could change quickly if they spread further into more densely populated regions.
“Second, the biggest impact increasingly extends beyond property damage, with business interruption, smoke, evacuation, and supply chain disruption all contributing to the economic cost. That’s why wildfire is becoming a resilience challenge as much as an insurance challenge.”
The current events demonstrate the increasingly complex nature of wildfire risk. While physical damage remains an important consideration, Guy Carpenter highlighted that the financial impact of major fires is increasingly shaped by wider disruption, including business interruption, smoke exposure, evacuation measures and transport disruption.
Guy Carpenter said these secondary impacts can affect businesses even where buildings are not directly damaged. Companies may face reduced access to premises, interruptions to operations, disrupted supply chains and additional costs linked to maintaining business continuity. For insurers and reinsurers, this creates a more complex claims environment where losses are not limited to the immediate area affected by flames.
The main emerging loss drivers from the current fires are expected to include agricultural damage, particularly affecting crops and vineyards, as well as smoke-related losses, evacuation costs and business interruption.
In Spain, Guy Carpenter noted that the wildfire-related property damage is covered by private insurers rather than the Consorcio de Compensación de Seguros. The company added that Agroseguro, the agricultural co-insurance pool, has confirmed that wildfire-related losses affecting insured farmers and livestock owners remain covered under agricultural policies.
In France, Guy Carpenter stated that damage to homes and commercial premises caused by wildfires is generally covered through standard fire insurance policies rather than the natural catastrophe guarantee. The company added that businesses with appropriate policy extensions may also receive compensation for business interruption losses, depending on the terms of their cover.
From a reinsurance perspective, Guy Carpenter said wildfire losses involving property damage and fire coverage would generally fall within relevant property damage or natural catastrophe treaties. The company noted that business interruption extensions may vary depending on policy structures and underwriting approaches, meaning the scale of recoverable losses will depend on individual coverage arrangements.
Guy Carpenter added that reinsurers generally follow the fortunes of ceding insurers for claims covered under the original policies, subject to treaty conditions, exclusions and the terms agreed between insurers and reinsurers.
The company concluded that the latest wildfire events underline the need for insurers, reinsurers and businesses to consider wildfire as a wider resilience issue. While improved prevention, landscape management and emergency response remain important, the changing nature of wildfire losses means risk management will increasingly need to address disruption as well as physical damage.
