The Old Paradigm Is Dead
Why Insurers Need a New Model for Wildfire Risk
Last month, wildfires have once again dominated headlines in both Europe and North America. According to the Copernicus European Forest Fire Information System, nearly 380,000 hectares (950,000 acres) have burned across Spain this year. At the time of the writing of this article, the United States was experiencing nearly 750,000 acres of active wildfire right now.
A new peer-reviewed study published by World Weather Attribution (WWA) puts these events into sobering perspective. Extreme fire weather conditions in Spain and Portugal — once rare — are now 40 times more likely due to climate change. Human-caused ignition events are burning 30% more intensely. In Portugal, wildfires now cover 2.3 times the area, and they are 40 times more likely to cause death compared to past decades.
This is not just a European story. It is a global inflection point, and the insurance industry sits directly in its path.
California’s Warning: The Insurance Industry Already Saw This Coming
California offers a glimpse into what happens when wildfire risk collides with outdated actuarial models. For decades, wildfire was treated as a minor, manageable peril. Loss ratios hovered in the 60% range through the early 2010s. But by 2015 and 2016, as hotter summers, erratic precipitation, and wind-driven fuel loads reshaped fire behavior, those ratios began to creep upward.
Then came the tipping point. In 2017 and 2018, catastrophic megafires pushed loss ratios to 242% and 213%, with combined ratios surging well above 120%. Even as insurers pulled back from high-risk geographies, their expense ratios climbed, eroding profitability further.
For insurers, the lesson is clear: their old models missed the transition. What had been rare, localized losses escalated into systemic, billion-dollar events — outpacing statistical expectations and rendering traditional approaches obsolete.
Why the Old Paradigm No Longer Works
For property insurers, wildfire is no longer a marginal peril. It is now a structural threat. The old statistical models, designed for a stationary world where yesterday’s averages guided tomorrow’s pricing, cannot keep pace with non-linear climate shifts.
David Sypnieski, founder of Athena, working in agricultural data at the time and observed:
- Hotter and drier seasons changed harvests, pest cycles, and fuel loads throughout the early 2010s. The trend was more pronounced each year
- Atmospheric rivers beginning in 2015–2016 accelerated vegetation growth, creating massive fire potential when the rains stopped.
- 2017–2018’s explosive increase in wildfires. Losses revealed the changes farmers had been dealing with for the prior decade. The environmental conditions had changed, and most actuaries missed the change. Wildfire had crossed from background noise to existential risk.
As long as the industry relies on backward-looking assumptions, it will remain trapped in cycles of loss ratios over 100%, combined ratios near 110%, and declining profits.
Athena for Insurance: The Path Forward
Athena Intelligence has built a framework for this new era. By combining geospatial intelligence, probabilistic modeling, and climate attribution science, Athena enables insurers to:
- Price with Accurate Risk Assessment — replacing blunt hazard maps with property-level probabilistic clarity.
- Reserve Correctly — aligning capital with the true shape of exposure.
- Manage Risk Portfolios — reweighting risk pools and pricing adaptively across geographies.
- Restore Profitability — supporting underwriting decisions that lead to sustainable growth.
And critically: Athena’s API is ready today. Insurers can integrate Athena’s wildfire risk intelligence directly into underwriting systems, actuarial workflows, and portfolio management dashboards, transforming wildfire from an opaque volatility driver into a quantifiable, manageable risk.
Next Steps
The old paradigm is dead. Insurers cannot return to the profitability of the early 2000s by clinging to outdated models. Wildfire is no longer a California-only peril — it is global, accelerating, and existential.
The companies that thrive in this new environment will be those who embrace innovation, adopt data-driven risk intelligence, and act decisively before the next season of catastrophic fires.
Athena Intelligence is ready. Our API is built for insurers who want to restore profitability, protect balance sheets, and lead the industry into a new era of resilience.
If you are an insurer, reinsurer, or risk pool leader ready to make the shift, reach out to Athena today. The sooner we modernize wildfire risk modeling, the sooner we can restore both profitability and stability to an industry on the front lines of climate change.
Better data drives better decisions. Better decisions build resilience. If wildfire risk is on your mind, explore some of our other articles.
Athena Intelligence is a data vendor with a geospatial, conditional, profiling tool that pulls together vast amounts of disaggregated wildfire and environmental data to generate spatial intelligence, resulting in a digital fingerprint of wildfire risk.
Clients include financial services companies, insurance, electric utilities, communities and homeowners’ associations (HOAs). Athena’s geospatial intelligence is incorporated into multiple products that can be accessed through an online portal. Athena’s data is currently used in wildfire mitigation plans (WMP) and public safety power shutoffs (PSPS), Community Wildfire Protection Plans (CWPP), property insurance underwriting and portfolio risk optimization.
Reach out to me at Elizabeth@AthenaIntel.io and follow us here, on LinkedIn or Energy Central.
