InsurTechs Highlight New Approaches to Wildfire Insurance

January 16, 2025 by

While the Southern California fires that sparked in high-wind conditions last week inch closer toward containment, estimates of insured losses continue to creep higher.

CoreLogic said in a Thursday briefing that the industry price tag of the Palisades and Eaton fires could balloon to between $35 and $45 billion. Moody’s RMS said this week that “it is already clear that this will prove the costliest wildfire in U.S. history.”

Related: Fire-Ravaged LA to See Respite But Danger ‘Not Yet Passed’

As the flames burned, Insurance Journal interviewed leaders of three companies that specialize in insuring areas that are prone to wildfire. They shared their perspectives on the peril and discussed how the ongoing fires could affect insurance moving forward.

Kevin Stein, Delos Insurance Solutions

Kevin Stein believes that wildfires no longer fit into the standard insurance market.

Stein is the CEO of Delos Insurance Solutions, an MGA that focuses on homeowners insurance in California. When he and his cofounder, Shanna McIntyre, entered the industry, “we found that there was a little bit of a misunderstanding of wildfire,” he said.

Generalist perils covered by large, standard market insurers change slowly and can use actuarial methodology to be understood, according to Stein. He noted that specialist perils, like cyber insurance, aren’t the same. These perils change rapidly or are complicated, meaning they require specialty expertise and data.

Related: Edison Utility Sued Over Role of Equipment in Los Angeles Fire

“We believe that wildfire is that now,” Stein said. “And I think the biggest difficulty is that it’s covered under home insurance and standard commercial property. And therefore, carriers have been saying, ‘Hey, I’ve been writing home insurance [for] 100 years. I should be able to do this.'”

Over the last seven years, Stein said he thinks carriers have finally come to realize, “No, this doesn’t work for them.” He believes that groups that view and approach wildfires in new ways will become more predominant in the California market.

Delos launched in 2017. Stein and McIntyre, who both have aerospace industry backgrounds, recognized an opportunity to take new satellite imagery and model wildfire in higher spatial and temporal resolutions.

In other words, they sought to use the data for more accurate information at physical addresses and use it to understand how those addresses could be affected by changing climate conditions. Delos partnered with Spatial Informatics Group (SIG), an environmental think tank made up of more than 100 academics who co-develop modeling for civil governments.

Related: The Most Important LA Wildfire Stories to Know About

“All this proprietary research, coupled with this new proprietary algorithm, and that turns into our wildfire underwriting,” Stein said. “And so far, back through 2017, it’s been, by our assessment, head and shoulders above the other models in the industry.”

Delos has a broad California footprint. As large carriers shrink their geography in the state, Delos leans on its modeling to “write in a lot of places where people don’t,” Stein said. Still, those models find areas in the state that are at extreme risk.

“It’s an unfortunate reality, but we do believe it’s a reality,” Stein said. “So, there are certain areas that we’re not willing to insure. That’s a lot less than what other people are declining. We’re accepting a lot of business that other people are declining, [a] very significant amount.”

Stein explained that Delos accepts 65% of the business that the primary market is currently declining because of perceived wildfire exposure. When asked what goes into Delos’ modeling, Stein said the company has a “significant amount of sophistication around wind and weather.”

Most other models focus on vegetation, he said, but in today’s landscape, wind and weather are “the biggest driver of wildfire loss in the Western U.S. and a lot of other places as well.” Delos taps into detailed wind maps and understandings of precipitation and vegetation moisture developed by SIG that inform the company’s modeling.

This enables decision-making to more deeply account for current conditions and predict how they could change in the next couple of years. SIG has also developed “a significantly more sophisticated understanding of vegetation,” Stein said.

Delos has a significant amount of information regarding how a fire would spread once it starts and what the firefighting strategy would be to defend against it, too. The company also has detailed understandings of neighborhoods and homes from large landscape and hardening perspectives.

Stein said that Delos believes this is what’s required to understand fire today.

“These folks get paid tens of millions of dollars a year to do seasonally wildfire research, and they’re some of the world’s top experts in it,” he said of SIG. “So, of course, they’re going to put money in that effort to developing a lot of really detailed information that other people just don’t have that space in their business plan — the space in their balance sheet — for that much research in wildfire.”

Stein called the fires currently burning in Southern California “a human tragedy.” Delos didn’t expect something of this magnitude and this level of loss, but the company knew it was possible, Stein said.

When asked on Jan. 13 if Delos insured any homes in the areas affected by the fires, Stein said that “our view of risk did encapsulate this event, so the areas that had the fires, we had seen as really risky for this type of event. Therefore, we were not writing in those locations.”

Isaac Espinoza and Brian Espie, Kettle

Could parametric insurance become a bigger piece of the wildfire insurance market?

Kettle is an insurance and reinsurance MGA built around a proprietary wildfire model that was developed using AI and machine learning technologies. Company leadership believes these technologies are better suited to predicting catastrophic climate risk.

The wildfire specialty company launched in 2020 and underwrites on behalf of insurers and reinsurers, mostly in Bermuda and London. Much of what Kettle does is on a parametric basis. Everything that the MGA writes is in a wildfire-prone area.

California is “far and away our largest state,” explained Brian Espie, Kettle’s chief underwriting officer. Kettle writes across the continental U.S. and has thousands of insureds between its insurance and reinsurance products. Espie said this week that Kettle does have exposure in the area affected by the current fires.

“Because we do play a big part in the parametric side, and the way that product is structured, I think we’re going to be well-positioned to be one of the fastest to not only know what our losses are in total but also to have them fully paid out,” said Isaac Espinoza, Kettle’s CEO.

“One of the advantages of parametric products is [they’re] pretty straightforward. There’s less dispute about if it is indeed a claim, and it’s already pre-determined what that amount is upon payout.”

Kettle’s parametric coverage triggers if a wildfire crosses the boundary of a covered property. When asked how Kettle can successfully underwrite risk in wildfire-prone areas, Espie pointed to “the amount of data that our model is able to ingest and output.”

That model uses roughly 130 terabytes of data across 40 or so geospatial, spatial and satellite real estate data sets. It is trained by running millions of simulations in the cloud, allowing Kettle to determine with precision what properties truly have higher exposure.

As time goes on, more data will be fed into that model. Espie expects it to continue to improve year by year.

“I think with a peril like wildfire, you really do require a lot of data and a lot of granularity to be able to have that risk precision and manage a balanced portfolio,” Espie said.

As tragic as the fires have been for those living in the affected areas, Espie said the events provide an opportunity for Kettle to show that the technology it uses in its model can provide advantages in predicting wildfire risk.

Both he and Espinoza believe there is also an opportunity to show that parametric coverage for wildfire can provide advantages to insureds who need quick payments following disasters.

Kettle is careful not to bill itself as the only solution for insurance needs. It instead views itself as a complimentary part of an overall risk management plan for insureds, particularly on a commercial basis. For example, some of the MGA’s policyholders may buy a nonparametric policy for coverage needs other than wildfire and buy a Kettle policy specific to that peril.

Only a small percentage of the 7,000 to 10,000 wildfires that burn across California each year cause any damage, Espie said, and catastrophic damage to the extent we’re seeing now is “even a smaller minority.”

“I think that there’s an instinctual reaction to run away from the fire and just say there’s no way to insure this peril, or the state of California is uninsurable as a whole,” he said. “But I think our view is that, actually, with enough data and enough technology and enough focus on wildfire that you can discern the areas of the state that are more exposed and more vulnerable.”

“And you can provide coverage to a lot of people that otherwise get painted with a broad brush.”

Valkyrie Holmes, Faura

Valkyrie Holmes, CEO of Faura, believes that a deep understanding of the structural qualities of buildings is crucial to insuring properties in high-risk areas. Her company specializes in helping insurance companies understand property survivability.

Faura goes beyond traditional climate modeling and taps into independent structure data to pinpoint the likelihood that a property will survive disasters. The company accounts for a property’s materials and resilience characteristics (such as vents designed to keep embers out of a building) and weighs that data against how those qualities have fared in past disasters.

Faura’s goal is to create a positive feedback loop by helping insurance companies stay profitable while also helping policyholders become more profitable consumers. Holmes said that “a good percentage” of Faura’s clients have written in areas impacted by the ongoing Southern California fires.

Holmes explained on Jan. 9 that preliminary Faura data from the wildfires showed that the more survivable structures in the area, depending on where the wind was blowing, had “resulted in more profitable business, or business that would have been previously overlooked and forgotten about, therefore unlocking opportunities for the carrier.” She expected more concrete loss numbers to become available for the affected areas in the coming weeks.

When she spoke to IJ last week, Holmes called the devastation from the fires heartbreaking. She encouraged insurance industry professionals to keep an eye on how insurers think about measuring disaster risk and whether their portfolios are ready for a disaster of this size. High-risk areas with large amounts of brush, little amounts of rain and the potential for very high winds should prompt a deeper assessment.

“You’ve got to think about all of those different things,” Holmes said. “And if you match up for that in a lot of different areas, then it’s a question of, ‘Well, are the actual independent assets in the structures going to be able to survive?'”

Models that have long accounted for aggregated climate risk have been important and beneficial for the insurance industry, she said.

“Now, we need to take another step forward — which is not a very hard step, in all reality — but it is a different way of thinking,” Holmes explained. “Where, now we need to understand whether our assets are actually going to still be standing.”

Top photo: Photos from the Palisades Fire that started in the City of Los Angelas, January 2025. Souce: CalFire.