Cotality: Wildfire risk threatens $1.4T in properties across western states

More than 2.5 million properties across the 10 most exposed western states face a moderate or greater risk of wildfire damage, representing nearly $1.4 trillion in reconstruction cost value (RCV), according to Cotality’s 2026 Wildfire Risk Report.

The analysis, released Wednesday, highlights a growing concern for insurers, reinsurers, investors and homeowners. It explains that losses are increasingly driven not only by wildfires but by conflagration, when fires spread structure to structure within neighborhoods.

Risk concentrated in California, Colorado, Texas

California remains the most exposed state, with 1.28 million at-risk properties and $850 billion in reconstruction cost value, the report found. But nearly half of all at-risk properties across the top 10 states (49.9%) are located outside California.

Colorado and Texas together account for nearly 560,000 at-risk properties and $252 billion in RCV, almost matching the $277 billion of exposure across the remaining seven states combined. Oregon, Arizona, Idaho, New Mexico, Montana, Washington and Utah round out the 10 most exposed states.

At the metro level, Los Angeles has the highest exposure with nearly 250,000 at-risk properties and $209 billion in RCV. Four of the 10 most exposed metros are outside California, led by Austin with more than 100,000 at-risk properties and $49.2 billion in RCV, followed by San Antonio, Denver and Spokane, Washington.

Conflagration risk reshapes exposure maps

Cotality’s modeling focuses on conflagration risk, in which the “fuel” for fire transitions from wildland into developed areas and then moves home to home. The company said traditional wildfire models, which emphasize terrain and vegetation, can understate this neighborhood-level hazard.

Layering conflagration potential onto a traditional wildfire risk score can add as many as 40 points to an individual property’s score, pushing meaningful hazard risk into areas legacy maps have classified as low risk, according to the report. That shift could materially change mortgage underwriting, pricing and capital decisions in markets previously viewed as relatively safe.

“Hearing that a property has a higher risk score than previously thought should not be thought of as a bad thing. It shows that new data and analytic capabilities create an opportunity to protect properties more effectively in the evolving wildfire environment we’re facing,” said Jamie Knippen, Cotality’s director of hazard insights.

“This represents a significant opportunity for the entire market: it empowers carriers to move away from broad-brush risk assessments and safely expand their underwriting footprint, and actively rewards homeowners who invest in resilience.”

Mitigation drives sharp differences in expected losses

The report also introduces a property-level mitigation score that evaluates three dimensions: community protections, conditions on and around the parcel, and how fire-resistant the structure itself is.

Homes in the top 10% of mitigation scores carry expected losses roughly 78% below the statewide average, Cotality found. Properties in the bottom 10% have more than 10 times the average expected loss — about $47 in expected loss for every $1 on the best-prepared homes.

Cotality said that spread illustrates how targeted risk-reduction measures — such as defensible space, hardening of roofs and vents, and neighborhood-scale fire breaks or fuel management — can materially change loss outcomes even in high-hazard regions.

For housing professionals, the findings underscore a growing divide between highly mitigated and underprepared homes in wildfire-exposed markets. That gap is increasingly relevant for insurance carrier appetite, premium levels and, ultimately, property valuations and mortgage performance.

Implications for insurers and housing markets

Insurers in wildfire-prone states have already been pulling back capacity, raising rates or exiting specific ZIP codes as catastrophic losses and reinsurance costs have climbed. Regulators in California and other states are simultaneously pressing carriers to stay in or reenter high-risk areas, often with new requirements around catastrophe modeling and mitigation credits.

Within that backdrop, more granular property-level data could help carriers distinguish between homes with similar geographic wildfire exposures but drastically different conflagration and mitigation profiles. In turn, this can support more surgical underwriting and pricing rather than broad moratoriums or nonrenewals.

“Property-level data empowers insurers to identify what steps homeowners can take to mitigate the risk on their properties and leverage that additional resilience in their decision making. Expanding the assessment means going beyond terrain and vegetation to look at factors like structure density, building materials, wind patterns and ember exposure,” Knippen said. “Carriers that account for these factors upfront can make sure homes are properly insured for the catastrophe they actually face — not just the forest fire, but the fire next door.”

For lenders, servicers and investors, the report’s findings point to the importance of understanding both insurance availability and mitigation status at the property level, particularly in fast-growing metros such as Austin, San Antonio and Denver where exposure is rising.

As more states consider building code updates, defensible space requirements and community-focused wildfire resilience programs, tools that quantify conflagration and mitigation could influence zoning decisions, disclosure rules, and eligibility for public or private resilience funding.

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.