The wildfires devastating the Los Angeles area could cause up to $250 billion in economic damage, comparable to the losses from Hurricane Katrina, The Harvard Business Review writes. This escalating risk is reshaping the insurance landscape. Unlike hurricanes, which insurers have long understood, wildfires have caught the industry off guard, with the 2017 and 2018 California fires incurring significant losses. The scale of these fires is pushing insurers to reconsider how they manage catastrophic risks, much like Hurricane Andrew did for hurricanes in 1992.  To address gaps in coverage, parametric insurance is emerging as a solution. Where parametric insurance differs from traditional insurance is that the focus is on the peril. Instead of a claim being based on how much damage a hurricane or earthquake does to a house or office tower, parametric insurance pays out based on the magnitude of the event. If the natural peril covered—wildfire, earthquake, or hurricane—reaches the necessary thresholds, the policy pays out. Otherwise, it doesn’t. Read the full article. It may require a subscription.