Cotality: Wildfire Risk Threatens $1.4 Trillion in Western Property Value

A $1.4 Trillion Wildfire Exposure Across the Western U.S.

More than 2.5 million residential properties across the ten most exposed western states now face a moderate or greater chance of wildfire damage, with a combined reconstruction cost value of nearly $1.4 trillion. Those figures come from Cotality’s 2026 Wildfire Risk Report, released Wednesday, which examines the financial scale of wildfire exposure at the state, metro and property level.

The report finds California is still the largest concentration of risk: about 1.28 million at-risk properties and $850 billion in reconstruction cost value. But the exposure is no longer only a California problem. Cotality says nearly half of the at-risk properties across the ten states — 49.9% — sit outside California, with Colorado and Texas together accounting for almost 560,000 properties and $252 billion in reconstruction cost value. Among metro areas, Los Angeles has the largest exposure at nearly 250,000 properties and $209 billion, while Austin, San Antonio, Denver and Spokane are the four most exposed metros outside California; Austin alone has more than 100,000 at-risk properties and about $49.2 billion in reconstruction value.

The report’s central argument is that the hazard is not only wildland fire moving into developed areas but “conflagration,” in which fire spreads from structure to structure through neighborhoods. Because traditional wildfire models focus on terrain and vegetation, Cotality contends they can understate that neighborhood-level risk. Adding conflagration potential can raise an individual property’s risk score by as much as 40 points, pushing high-hazard conditions into areas legacy maps treated as low risk, with consequences for insurance underwriting, mortgage pricing and capital decisions.

Why Conflagration Risk Is Rescoring Western Property Risk

California Leads, but the Risk Is Broadly Distributed

California remains the dominant single-state exposure, but the report’s 49.9% figure is the more important market signal: lenders and insurers can no longer treat wildfire as a California-specific concentration. Colorado and Texas together carry nearly $252 billion in reconstruction value, only slightly below the $277 billion across the remaining seven states combined. The rapid growth of metro areas such as Austin, San Antonio and Denver means exposure is rising in places where insurance capacity and wildfire resilience infrastructure have historically been less developed than in California.

Conflagration Modeling Changes What Counts as High Risk

The shift from wildland-only models to conflagration models matters because it changes individual property scores. Cotality says layering conflagration potential on top of a traditional wildfire score can add up to 40 points to a single property’s rating. That means homes far from the wildland-urban interface can still be exposed if surrounding structure density, building materials, wind patterns and ember exposure create a home-to-home fire path. This is an analytical insight, not a verified regulatory standard, but it aligns with recent loss patterns in which urban neighborhoods burned without a direct forest fire front.

Mitigation Scores Split High-Risk Housing Markets

The report introduces a property-level mitigation score based on community protections, parcel conditions and the fire resistance of the structure itself. Cotality finds homes in the top 10% of mitigation scores have expected losses roughly 78% below the statewide average, while properties in the bottom 10% have more than ten times the average expected loss — an order-of-magnitude spread. That supports the report’s claim that specific measures such as defensible space, roof and vent hardening, and neighborhood-scale fuel management can materially change outcomes even in high-hazard regions.

Regulators and Carriers Are Pulling in Different Directions

Insurers in wildfire-prone states have been narrowing capacity, raising rates or exiting ZIP codes as losses and reinsurance costs have climbed. At the same time, California and other states are pressing carriers to remain in or reenter high-risk areas, often with new catastrophe-modeling and mitigation-credit requirements. Property-level conflagration and mitigation data could give carriers a way to distinguish between homes that share the same geographic wildfire exposure but have sharply different loss profiles, supporting surgical underwriting rather than blunt nonrenewals. That is an opportunity and a compliance burden: using the data well requires underwriting systems that can consume parcel-level hazard inputs, not just broad risk zones.

Where Lenders, Insurers and Homeowners Respond to the New Risk Data

For insurance carriers, mortgage lenders, servicers, investors and housing professionals with western exposure, the report points to a few specific steps.

• Stress-test portfolios with conflagration data, not state maps. Since Cotality says conflagration potential can add up to 40 points to an individual score, insurers and lenders should compare legacy wildfire maps against the new overlay in exposed metros — especially Los Angeles (nearly 250,000 properties, $209 billion RCV), Austin (over 100,000, $49.2 billion), San Antonio, Denver and Spokane.
• Use property-level mitigation scores in underwriting and loss estimates. The top 10% of mitigated homes show expected losses about 78% below the state average, while the bottom 10% carry more than ten times the average. That spread justifies pricing or capacity decisions based on actual structural hardening, defensible space and community protection rather than ZIP code alone.
• Treat insurance availability as a property-level risk factor in mortgage valuation. Lenders, servicers and mortgage investors should assess whether individual properties in wildfire-exposed markets have adequate coverage and documented mitigation because the report links those factors to premium levels, property valuations and mortgage performance.
• Prepare for disclosure and resilience rules. Cotality’s data may feed building code updates, defensible-space requirements and public or private resilience funding eligibility. Housing professionals in western states should align property documentation and borrower communications with those likely requirements now.
• Homeowners should document actual mitigation, not just location. The report’s remediation message is specific: defensible space, roof and vent hardening, and neighborhood-scale fuel management materially change expected loss. Proof of those improvements can strengthen an insurer or lender conversation in high-risk metros.