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Wildfire Model Legislation Spreading to Colorado

By Sara Chen
Posted on Emerging Issues

A bill that’s making its way to the governor’s desk in Colorado will increase scrutiny on models used in rating or underwriting wildfire risk. After the California wildfires in January, Colorado introduced House Bill 1182: Risk Model Use in Property Insurance Policies (HB 1182), which, according to the text, applies to “insurers who use a wildfire risk model, a catastrophe model, a combination of models or a scoring method.” It proposes the following:  

  • Include in rate filings a description of the model, its impact on rates and an explanation of how it is used in underwriting.
  • Incorporate mitigation activities at the property, community and state levels into the models.
  • Post on the carrier’s public website information about discounts, incentives or adjustments that are available to policyholders who undertake mitigation efforts.
  • Require a written notice to policyholders of their wildfire risk score and how much the score and mitigation efforts impacted the policyholder’s rate or premium. 

This bill comes as an effort to increase transparency around how wildfire risk is assessed and accounted for in rates. It also aims to encourage mitigation efforts. This bill is set to take effect January 1, 2026.  

What this means for actuaries: 

Actuaries can anticipate completing more filing requirements when they submit their models for approval in Colorado. Any wildfire models in development or set to be in development will need to quantify the impact of mitigation activities. Actuaries can use their company’s internal data in addition to publicly available data and research to estimate this impact. California has a similar regulation, Regulation 2644.9, to serve as a precedent. When developing wildfire models and risk scores, keep in mind that explainability is key for ease of filing. Ultimately, increased transparency helps bridge the gap between insurance carriers and policyholders.  

Furthermore, we can safely assume Colorado and California won’t be the only states pushing for more regulation around catastrophe models. HB 1182 may fan the flames for similar regulation to come to other states, particularly those that are wildfire-prone such as Washington and Oregon. In other parts of the country, states plagued with their own region-specific catastrophes may draw inspiration from HB 1182 and draft similar legislation to recognize homeowners’ mitigation efforts.