Insurers Retreat as 2025 Wildfire Risk Reaches Dangerous Levels

New report reveals 150,000+ uninsured households in California's highest-risk areas as spring fire conditions hit 10-year records

MONTREAL, June 6, 2025 /PRNewswire/ -- Deep Sky, the Canadian carbon removal project developer, has published new research revealing a home insurance crisis unfolding across North America as wildfire risk reaches dangerous levels in 2025. The comprehensive analysis shows insurance companies are abandoning homeowners in the highest-risk areas, with over 150,000 households now uninsured in California's most fire-prone regions alone.

Deep Sky Research's latest report, "Wildfires 2025," analyzes insurance market data from California, Oregon, Texas, and Washington alongside advanced fire weather modeling to reveal how climate change is reshaping both wildfire risk and financial markets. The research builds on Deep Sky's previous wildfire analysis from 2024, which found that extreme fire risk frequency had grown 20-fold across the United States.

Insurance Markets as Climate Indicators

The research reveals insurance companies are using sophisticated catastrophe modeling to predict wildfire risk, leading to dramatic market retreats from high-risk areas. The Los Angeles fires in January demonstrated the financial stakes, with insurance losses potentially reaching $44.5 billion across major carriers.

"Insurance markets are leading indicators of how financial systems will respond to climate change," said Max Dugan-Knight, Deep Sky Climate Data Scientist. "When insurers can no longer price risk effectively, they exit the market entirely. This creates a cascade effect that will ultimately impact property values, mortgage availability, and regional economic stability."

The analysis shows that California's FAIR plan and similar government programs in other states are becoming overextended as private insurers retreat. These "insurers of last resort" provide subsidized coverage but face mounting financial pressure as more homeowners are forced into their programs.

Dangerous Spring Conditions

Deep Sky Research's Fire Weather Index (FWI) analysis reveals that 2025 spring conditions are abnormally dangerous across large portions of North America. The research calculates FWI anomalies by comparing current conditions to 30-year historical averages, showing widespread areas experiencing fire weather conditions not seen in over a decade.

In Canada, early-season fires have already forced thousands of evacuations in Manitoba and Saskatchewan, with both provinces declaring states of emergency. The data indicates that Alberta and British Columbia face even higher fire risk as the peak season approaches.

Building on Previous Research

This analysis extends Deep Sky Research's ongoing work on climate risk prediction. The company's 2024 wildfire report found that extreme fire weather conditions that previously occurred once every 100 years now happen every five years on average – a 20-fold increase in frequency.

"Our 2024 analysis showed how dramatically fire frequency was increasing," Dugan-Knight noted. "This year's research demonstrates that the financial and human costs of these changes are already materializing. Insurance markets are telling us what climate scientists have been warning about – the risks are accelerating faster than our systems can adapt."

Market Implications

The research suggests that the insurance crisis foreshadows broader financial market responses to climate risk. As private insurers retreat and government programs become overextended, property values in high-risk areas face potential collapse. Banks are unlikely to approve mortgages without insurance coverage, creating a cycle that will soon strain property markets.

"A vicious cycle is emerging" the report states. "Climate change causes worse fire conditions, which cause larger wildfires, which create massive carbon emissions, contributing to further climate change…Insurance markets may be the first to show the effects of the climate crisis but the disruption won't stop there."

The full report, including detailed methodology and risk maps, is available at deepskyclimate.com/research.

Key Findings:

Insurance Market Crisis:

• One in five homes in California's most extreme fire risk areas has lost coverage since 2019
• Home insurance premiums have skyrocketed 42% in the highest-risk areas since 2009
• Over 30,000 households in extreme fire risk parts of California have had policies non-renewed since 2018
• Growth in government-subsidized FAIR plans: California (121%), Texas (54%), Oregon (39%) since 2020

Record-Breaking Fire Conditions:

• Spring fire risk in the US Southwest and Northern Mexico has reached a 10-year record
• Northwestern Alberta is facing a 15-year record for spring fire risk
• Severe drought across Arizona, New Mexico, Texas, and Southern California is driving unprecedented conditions
• Over 200 active fires are burning across Canada, with half classified as "out of control"

Climate Impact Acceleration:

• "Hydroclimate whiplash" – extreme swings between wet and dry years – is worsening fire conditions
• The relationship between precipitation extremes and fire risk is creating dangerous fuel loads

About Deep Sky

Montreal-based Deep Sky is the world's first tech-agnostic carbon removal project developer aiming to remove gigatons of carbon from the atmosphere and permanently store it underground. As a project developer, Deep Sky brings together the most promising direct air and ocean carbon capture companies under one roof to bring the largest supply of high-quality carbon credits to the market, commercializing and catalyzing carbon removal and storage solutions like never before. With $130M in funding, Deep Sky is backed by world class investors including Investissement Québec, Brightspark Ventures, Whitecap Venture Partners, OMERS Ventures, BDC Climate Fund, BMO, National Bank of Canada, Breakthrough Energy Catalyst, and more. For more information, visit deepskyclimate.com

SOURCE Deep Sky