Research Note

Wildfire Catastrophe Model Record

A catastrophe model simulates many plausible events, estimates damage to an exposure portfolio, applies policy and reinsurance terms, and produces a distribution of finan

Aug 4, 20262 min readBy Dalton Anderson

Source conversation

California Wildfires: A Deep Dive into the Crisis with Tom Mercer

Keywords California wildfires, insurance market, regulation, Fair Plan, risk assessment, reinsurance, climate change, technology, commercial insurance, wildfire mitigation Summary In this episode of the Venture Step podcast, Dalton Anderson and guest Tom Mercer discuss the ongoing California wildfires, the complexities of the insurance market, and the regulatory challenges that have arisen in response to these natural disasters. They explore the implications of the Fair Plan, the role of reinsurance, and the need for innovative risk assessment technologies. The conversation highlights the importance of building resilience against wildfires and the potential for future improvements in California's insurance landscape. Takeaways California has been experiencing severe wildfires for years. The Eaton fire is now 98% contained, but the damage is extensive. High winds significantly hinder firefighting efforts. The insurance market in California faces unique regulatory challenges. The Fair Plan serves as a last resort for homeowners in high-risk areas. Reinsurance costs have been rising due to increased climate activity. Insurance companies are struggling to remain profitable in California. There is a need for better building codes and fire mitigation practices. Innovative technologies can help assess and price wildfire risks. Collaboration between insurers and regulators is essential for market stability.

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Wildfire Catastrophe Model Record

What the model computes

A catastrophe model simulates many plausible events, estimates damage to an exposure portfolio, applies policy and reinsurance terms, and produces a distribution of financial loss. It does not predict the exact date, ignition, path, or loss of the next fire.

The NAIC property catastrophe-model record defines the four core components and outputs:

https://content.naic.org/insurance-topics/catastrophe-models-property

Component	Function
Hazard	Event catalog, location, intensity, path, frequency, and footprint
Vulnerability	Damage conditional on intensity and construction characteristics
Exposure	Geocoded properties, occupancy, values, and data quality
Financial	Policy and reinsurance terms applied to damage

Outputs can include average annual loss, occurrence or aggregate exceedance probability curves, and return-period loss estimates.

Uncertainty and governance

Model output depends on event sets, data, assumptions, calibration, vulnerability functions, geocoding, valuations, policy terms, demand surge, version, and user choices.

Two models or versions can disagree without either being a point forecast. Review requires intended use, validation, sensitivity, limitations, change control, and qualified interpretation.

California status

California finalized catastrophe-model regulations in December 2024 and completed review of the first wildfire model in July 2025:

https://www.insurance.ca.gov/0400-news/0100-press-releases/2025/release052-2025.cfm

The public wildfire model is a separate initiative authorized in 2025. As of July 28, 2026, the Department had requested university expertise and anticipated issuing a development grant in October 2026:

https://www.insurance.ca.gov/01-consumers/180-climate-change/public-wildfire-model.cfm

Regulatory review or permitted use does not guarantee accuracy for every portfolio, decision, rate, property, or event.

Sources

Follow the evidence.

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