Author: Firas Saleh, Director - Insurance Product Management, Moody's
California’s insurance market is transforming. To reflect the realities of a changing wildfire risk landscape, there is a clear shift toward more reliable, risk-based insurance policy pricing, empowered by catastrophe modeling.
California’s insurance market is transforming. To reflect the realities of a changing wildfire risk landscape, there is a clear shift toward more reliable, risk-based insurance policy pricing, empowered by catastrophe modeling.
With the success of Moody’s RMS™ U.S. Wildfire HD Model Version 2.0 in completing the California Department of Insurance (CDI) Pre-Application Required Information Determination (PRID) process for use in residential rate making, the CDI has allowed insurers to utilize our powerful model to reshape how wildfire risk is managed and reflected in pricing.
With Moody’s completion of the PRID, this regulatory milestone supports the state’s objectives for a more stable, accessible, and resilient insurance market, particularly in high-risk areas where coverage has become increasingly scarce. It also reinforces California’s broader commitment toward science-based, forward-looking risk management solutions that recognize both the complexity of wildfire risk and the importance of community-level mitigation.
Why this matters for Californian communities
In California and across North America, wildfires are no longer rare or isolated events; they are becoming more frequent, more intense, and increasingly capable of devastating entire communities and the lives of people living there. Capturing the evolving risk with unprecedented detail, the Moody’s RMS wildfire model includes the ability to reflect complex urban fire spread scenarios, such as those seen in the Los Angeles fires, allowing for cooperation between insurers, communities, and policyholders towards more effective risk mitigation.
By equipping insurers with deeper insights into wildfire behavior and acknowledging mitigation efforts, the Moody’s RMS wildfire model helps lay the groundwork for a more equitable and stable insurance system, with pricing that rewards resilience and protects communities on the front lines of wildfire-driven risk.
This ability to incorporate mitigation measures is one of the key tenets of the Moody’s RMS wildfire model. Aligning with California Code of Regulations Section 2644.9, insurers can use the model to reflect home hardening and community-level resilience efforts in their rate filings.
Homeowners who take steps to reduce their risk, like clearing defensible space or upgrading roofing materials, can now start to see those efforts reflected in their premiums. This approach not only promotes greater equity but also potentially encourages a culture of shared responsibility between insurers, communities, and individuals.
A foundation for long-term market stability
The CDI’s Pre-Application Required Information Determination (PRID) process was a rigorous, transparent review to ensure that the Moody’s RMS wildfire model, when used to inform rate making, is grounded in science. With this foundation in place, insurers can move forward with greater confidence when using our model, knowing it meets regulatory expectations and supports the long-term health of the market.
The development of Moody's wildfire model and subsequent completion of the PRID process were not just a technical achievement but a meaningful step toward a future where insurance is more accessible, pricing is more reflective of real risk, and communities are better equipped to withstand the growing threat of wildfire.
For the insurance industry, the Moody’s RMS wildfire model, covering the entire contiguous U.S., Hawaii, and Canada, delivers the most advanced science and high-resolution data to reflect the evolving dynamics of wildfire behavior, reconstruction costs, and regulatory requirements.
Updated in late 2024, the Moody's RMS model equips insurers with the insights that they need to understand risk, support mitigation, and promote financial stability across wildfire-prone regions of the U.S. Already adopted by leading insurers, utilities, and financial institutions, with the CDI review complete, the model can play a central role in restoring insurance options in areas where they’ve become scarce, helping to close protection gaps and build resilience across California.
Accessing the models through Moody’s Intelligent Risk Platform
Serving as the gateway to Moody’s RMS North America Wildfire HD Models and a suite of other HD models, the Risk Modeler™ application, accessible on Moody’s Intelligent Risk Platform™ (IRP), utilizes cloud computing technology, so users can input their data, select analysis settings, and receive detailed loss statistics and distributions. Already processing risk analysis for tens of billions of locations per month, the IRP and associated applications make it quick and simple to get the latest risk model insights, without the need for burdensome IT infrastructure.
With the power of the cloud-native IRP and the HD framework simulating thousands of years of potential fire activity, the modeling process is streamlined by the pre-compilation of millions of fire footprints for the U.S. and Canada. When combined with vulnerability and financial data, it provides a comprehensive assessment of potential insured losses.
Explore a range of resources showing how insurers can empower wildfire risk management with Moody’s RMS Wildfire HD Version 2.0 Model here.
Moody's RMS North America Wildfire HD Models
In an era of escalating wildfire threats and growing exposure in high-risk areas, accurate risk assessment and mitigation are more critical than ever.
Discover how Moody's RMS North America Wildfire High-Definition (HD) Models version 2.0 offer a cutting-edge solution, integrating advanced modeling techniques to address the complexities of today’s wildfire landscape.