ILS investor caution over wildfire risks is continuing to mount amid concerns over modelling capabilities and pricing adequacy, according to panelists at The ReInsurer’s third virtual debate.


This year has seen record acreage burn in California, which followed unprecedented insured wildfire losses of around $25bn across 2017 and 2018.

In the retro market, where alternative capital now plays a dominant role, there has been a push back on wildfire exposures. Paul Schultz, CEO at Aon Securities, said wildfire is more challenging than other perils in the market.

“Among investors, there is a lack of confidence in the level of understanding of the peril. It’s a question of how investors become comfortable that existing models are adequate, and that will take some time to play out,” he said.

The high levels of loss activity experienced in 2017 and 2018 have seen retro cover for wildfire risks, which typically renews in January and June, shift from being structured on an aggregate basis to an occurrence basis in a bid to better manage exposures.

This has in turn driven up reinsurance pricing for wildfire exposures. 

Stephan Ruoff, who this month succeeded Dirk Lohmann as head of Schroder Secquaero, said it was concerning that California has already seen record acreage burn in 2020 when the wildfire season technically does not even begin until later in the year.  

“We have positioned our portfolios away from wildfire – we do not believe you can consistently model wildfires for investors,” he said.

Michael Millette, founder and managing partner at Hudson Structured Capital Management, told the virtual panel discussion the ongoing wildfires were the latest signal of a changing climate.

“Since 2017, we have seen a lot of fingerprints of climate change with a net shift from wind and shake to water and fire,” he said.

“Hurricane Sally is essentially a water event. We have a fire event going on in California and up through the Pacific northwest. And we need to regear some of the models to deal with that.”

Philipp Kusche, global head of ILS and capital solutions at TigerRisk Capital Markets, said investors were focused on responding to the wildfire peril. A lot of work has been done since 2017 to improve modelling and awareness through the ILS sector, he said.

“But there remains a pricing question around what is perceived to be adequate for something that is clearly an increased risk,” he said.

Judy Klugman, head of ILS Sales at Swiss Re Alternative Capital Partners, cautioned however that there is a difference between an active wildfire season and losses that actually eat into towers.

“My understanding right now around wildfire is that there has been around $1bn of losses, so in terms of where we are right now, that should not have an impact on our asset class.”

Watch The ReInsurer’s third virtual debate: “ILS market: resiliency, opportunity and capacity challenges”


  • Judy Klugman, Head ILS Sales, Swiss Re Alternative Capital Partners
  • Philipp Kusche, Global Head of ILS and Capital Solutions, TigerRisk Partners
  • Michael Millette, Founder and Managing Partner, HSCM
  • Stephan Ruoff, Head of Schroder Secquaero
  • Paul Schultz, CEO, Aon Securities
  • Chris Munro, North American associate editor, The Insurer (Moderator)

View debate highlights here.