A leading catastrophe modelling expert is sounding the alarm that wildfires are not just a costlier problem — they could rival hurricanes for economic damage.

“A couple of years ago, when KCC released our first wildfire model, it showed insurers that there were large-loss scenarios in the tail of their loss distributions from wildfires that were comparable to hurricane losses,” said Karen Clark, founder of Karen Clark and Co.

That eye-opening comparison marks a significant shift in how insurers view wildfire risks. Bermuda insurers and reinsurers estimate they will incur gross claim losses of almost $10 billion in payments to policyholders and cedants in the United States to cover the damaging effects of the January California wildfires.

But it is not only climate change fuelling this danger; rising property costs are also a huge factor.

As Ms Clark noted: “The main driver is increasing exposure — that is more properties being built in harm’s way and in many cases are more expensive.

“An interesting statistic; you know, if you take the same single-family home in the US, the cost to build that today is twice as much as it was ten years ago.”

Fire crews now target neighbourhoods with strong wildfire defences, she said, focusing efforts where they matter most.

“First of all these LA fires were very high-wind events … firefighters are trying to make real-time decisions as to which homes they're going to try to save; they’re going to naturally look at areas where there is good mitigation and they’re most likely to be successful.”

Still, she emphasised that protecting your own home is not enough. Neighbourhood-wide efforts are essential because “community-level mitigation, or neighbourhood mitigation, is just as important as mitigating your own home”.

Thanks to developments in technology, Ms Clark believes insurers can now use machine learning to update risk models in close to real time, making them far more accurate.

With annual loss potential rising, insurers are increasingly relying on these tools to fine-tune pricing and readiness.

For Bermuda’s reinsurance market, this is a chance to lead in wildfire risk solutions.

As property values climb and climate shifts continue, “staying ahead with advanced modelling and community-based mitigation could be what separates resilience from crisis”.