Wildfire Risk Threatens $1.4T in Western Properties

More than 2.5 million properties across the 10 most exposed western states are at moderate or greater risk of wildfire damage, with an estimated reconstruction cost value (RCV) of nearly $1.4 trillion. This finding comes from Cotality's 2026 Wildfire Risk Report, released on Wednesday, which highlights escalating concerns for insurers, reinsurers, investors, and homeowners. The report emphasizes that property losses are increasingly influenced not only by traditional wildfires but also by conflagration, a phenomenon where fires spread from structure to structure within residential neighborhoods. California stands out as the most exposed state, with 1.28 million properties at risk and an RCV of $850 billion. However, nearly half of all at-risk properties across the top 10 states, specifically 49.9%, are located outside of California. Colorado and Texas combined account for approximately 560,000 at-risk properties and $252 billion in RCV. This combined exposure from these two states is almost equivalent to the $277 billion in exposure found across the remaining seven states within the top 10. The other states identified as having significant wildfire risk exposure are Oregon, Arizona, Idaho, New Mexico, Montana, Washington, and Utah. At the metropolitan level, Los Angeles faces the highest exposure, with nearly 250,000 at-risk properties and an RCV of $209 billion. Notably, four of the ten most exposed metropolitan areas are situated outside of California. Austin leads this group with over 100,000 at-risk properties and $49.2 billion in RCV, followed by San Antonio, Denver, and Spokane, Washington. Cotality's modeling specifically focuses on conflagration risk, defining it as a scenario where the "fuel" for a fire transitions from wildland vegetation into developed areas and subsequently spreads from one home to another. The company suggests that conventional wildfire models, which primarily consider terrain and vegetation, may underestimate this localized, neighborhood-level hazard. By incorporating conflagration potential into traditional wildfire risk assessments, an individual property's risk score can increase by as much as 40 points. This integration can elevate properties in areas previously classified as low risk by legacy mapping systems into a zone of meaningful hazard. The report's methodology underscores the evolving nature of wildfire threats and the need for more sophisticated risk assessment tools that account for the spread of fires within communities, not just from natural landscapes.