Wildfire Risk and Regulatory Compliance: A Strategic Guide for Property Insurers
- Written By Bradley Jones
By Bradley Jones, Senior Actuarial Consultant, Perr&Knight
Wildfire risk has moved from a regional concern to a central issue in property insurance ratemaking. Loss experience is changing, capacity is constrained in several western states, and a new wave of regulation is taking shape around how insurers assess and price wildfire exposure. Colorado’s House Bill 25-1182 is one of the clearest recent examples of where this regulatory trend is heading, and insurers writing property business in wildfire-exposed states should be preparing now. In this guide, we explore how carriers can navigate complex regulatory environments, like Colorado’s HB 25-1182, while leveraging advanced wildfire risk modeling to maintain rate adequacy.
Regulation and advances in wildfire risk modeling can work together to support rate adequacy for wildfire risk.
Key Trends: Rising Wildfire Risk and Insurance Pricing Impacts.
Wildfire activity has increased significantly over the past several decades, with long-term trends showing substantially greater acreage burned across much of the western United States. Additionally, the share of acreage burned at high severity is rising1. Taken together, the data points to a shift in the historical wildfire loss distribution – meaning the historical wildfire data increasingly understates prospective risk.
The market impact is most visible in states with significant wildland-urban interface (WUI). In Colorado, average homeowners insurance premiums have increased substantially over the past decade, placing the state among the most expensive in the country. The Colorado FAIR Plan, launched in April 2025, was established in direct response to availability and affordability pressures in the residential market. The FAIR Plan’s creation underscores the extent to which traditional ratemaking and underwriting approaches have struggled to keep pace with current risk. California faces similar pressure from projected increases in wildfire risk, as wildfire exposure continues to affect property insurance pricing and availability in high-risk regions. For example, California’s FAIR Plan, the state’s insurer of last resort, has seen a surge in new policies written and total written premiums for high-risk properties.
Colorado HB 25-1182: The Next Step in Regulation
Colorado’s HB 25-1182, Risk Model Use in Property Insurance Policies, takes effect July 1, 2026. The legislation is focused on transparency, accountability, and the role of mitigation in wildfire pricing for homeowners and other property insurance lines.
Under the act, any insurer that uses a wildfire risk model, catastrophe model, or scoring method to influence whether a policy is written and/or how much a policy costs, must:
- Include in its rate filing a description of the model, its impact on rates, and an explanation of how it is used in underwriting decisions.
- Incorporate property-level and community-level mitigation activities into the model or the underwriting process.
- Post on the carrier’s public website the discounts, incentives, or adjustments available to policyholders who undertake mitigation efforts.
- Provide an annual written notice to each policyholder of their wildfire risk score and an explanation of how that score and any mitigation efforts impacted the rate or premium.
The Colorado Division of Insurance (DOI) has pending Regulations 5-1-28 and 5-1-29, which, if adopted, would provide compliance guidance to insurance carriers for HB 25-1182.
Other States Are Moving in the Same Direction
California has already implemented a comprehensive set of reforms through its Sustainable Insurance Strategy, aimed at modernizing ratemaking, improving market availability, and addressing wildfire risk through approved use of wildfire models and the net cost of reinsurance in rate filings.
While California and Colorado have taken the most comprehensive regulatory actions to date, several other western states are moving in a similar direction. Montana has enacted insurer disclosure requirements and authorized mitigation discounts. Oregon has utility wildfire mitigation plan requirements in place, a measure that often serves as a precursor to broader insurance regulation.
Our expert actuarial consulting for property insurance expect the pace of state-level wildfire regulation to continue, particularly in states where catastrophe losses are putting pressure on rate adequacy and market availability.
The Role of Advanced Wildfire Risk Modeling
In many respects, these regulatory changes mirror broader shifts already taking place in catastrophe modeling and property ratemaking. Advances in wildfire risk modeling now allow insurers to move beyond traditional, territory-based approaches toward more granular, property-level risk assessment. These tools directly support transparency, mitigation-credits, and policyholder-notice requirements embedded in HB 25-1182.
Implementing wildfire scoring into a rating plan is much more than a modeling exercise. Carriers also need adequate filing support, mitigation credits, model governance, and consistency between underwriting rules and rating algorithms. Regulators are focused not only on predictive accuracy, but also on whether insurers can clearly explain how wildfire models affect individual policyholders.
How Perr&Knight Can Help
For insurers writing business in wildfire-exposed regions, the challenge is more than just catastrophe exposure. Colorado’s HB 25-1182 illustrates how carriers must now be prepared to support model-driven pricing decisions through filings, disclosures, mitigation programs, and policyholder communications.
Perr&Knight combines actuarial and product expertise, regulatory insight, and significant Colorado support for property rate filings and regulatory compliance to help insurers build wildfire pricing strategies that are actuarially sound, compliant with HB 25-1182, and adaptable to the next wave of state regulation.
Contact Perr&Knight today to discuss your wildfire pricing and compliance strategy.
1 Parks, S. A., Coop, J. D., & Davis, K. T. (2025). “Intensifying Fire Season Aridity Portends Ongoing Expansion of Severe Wildfire in Western US Forests.” Global Change Biology, 31, e70429. https://doi.org/10.1111/gcb.70429.
