Just days after the Maui fires, Roy Wright, head of an insurance industry- funded research organization, began mobilizing a team.

His team’s job is to analyze exactly how the fires spread once they hit an inhabited area, looking for clues like how burning embers got into buildings that hadn’t yet ignited and whether things like fences, plants and sheds close to various houses helped the fires spread.

“We focus on the point by which the fire intrudes into the neighborhoods,” said Wright, CEO of the Insurance Institute for Business and Home Safety, which investigates the causes of big insurance losses and proposes ways to reduce them.

Weeks after wildfires killed at least 115 people on Maui, insurance companies are beginning to assess the damage to calculate their payouts. Early estimates for the total cost of the fires are $4 billion to $6 billion, according to a report from Moody’s Risk Management Solutions.

But private insurers, already grappling with the costs of climate-related disasters in California and Florida, are also reassessing a home insurance market they had long considered both predictable and profitable, and whether they should charge residents of Hawaii higher rates.

The occurrence of another unexpected catastrophic event “is going to have an impact globally for the underwriting community,” said Sean Kent, an insurance broker for FirstService Financial.

Hawaii hadn’t been on the minds of insurers. With few natural disasters since Hurricane Iniki in 1992, and thus few payouts, Hawaii has offered the highest return on investment for insurers looking for calm waters. The models that insurance companies use to stay profitable — which make predictions based on past data — seemed to back that up.

Although Hawaii’s market is unlikely to suffer the same fate as those in Florida and California, which many private insurers have left entirely, experts expect companies to seek higher rates in the state to reflect a riskier environment. Raising rates involves state approval, and public officials might be hesitant to agree to significantly higher rates. But if rates do rise, homeowners will probably bear the consequences. Insurers have set out to find out what went so wrong in Hawaii and how they can better prepare for the next disaster.

Bigger insurers might not feel squeezed immediately in Hawaii, as the state has been historically lucrative for them. According to an analysis from Shan Ge, a professor of finance at New York University who studies the insurance industry, Hawaii had the highest home insurance markup rates of any state from 1996 to 2021, as insurers raised premiums for homeowners without having to pay out many claims.

Insurers are primarily concerned with two factors when deciding how much coverage to offer and where: the frequency of claims and the severity of those claims. The Maui fires are another data point of losses for insurers. Operating at a profit becomes harder for underwriters as extreme weather events become more frequent and powerful.

The Maui fires came at a time of crisis for the global insurance market, as the frequency of costly disasters brought on by climate change has scrambled the math for insurers, making it harder for them to get access to fresh capital. Since the start of the year, insurers have paid out more than $40 billion in damage claims, on a pace for a record in yearly losses.

The insurers for insurance companies, also known as reinsurers, are an important part of the equation. Reinsurers have been losing money for years, and they’ve been forced to raise their prices. Those rising prices, in turn, have been cited by companies like State Farm and Allstate as the reason they’re pulling back their coverage in some places.

“What you are seeing,” said Kristen Jaconi, a professor of accounting at the University of Southern California, “and you continue to see this, is insurers and reinsurers are disclosing in these risks that climate change is challenging their ability to model and underwrite catastrophe risks, given the increasing frequency and severity of these weather events.”

The Moody’s report found that $2.5 billion to $4 billion worth of insured property value was affected by the fires in the towns of Lahaina and Kula. For insurers, that means making smaller payouts than they did for recent disasters such as Hurricane Ian, which caused $113 billion in damage in Florida in September. But even if the measured losses from the fires might not be relatively large, they could have a chilling effect on insurers across the country.

Members of Wright’s team at the insurance industry institute are analyzing imagery from satellite and aerial footage. Later, they will start collecting information from the ground. Their mission: to figure out exactly how the fire spread once it hit an inhabited area.

Researchers will also closely study the structures that survived to try to figure out what made them more resilient, Wright said. They have already determined that one of the housing developments that survived did so because its buildings had roof vents that prevented burning embers from blowing inside, more flame- resistant roof and wall materials, and fewer big plants close to walls.

Eventually, his organization will make recommendations for how to build new structures that can better withstand wildfires and how to retrofit buildings in nearby areas to try to protect them from a fate similar to Lahaina’s.

“Ultimately, we’re trying to bend down the future risk,” Wright said. “Insurers want to know: Did this play out in ways that we would have predicted, or are there particular nuances or outliers in this instance that surprised us?”

Victims of the fire are just beginning to connect with insurers and other aid sources to try to recover some of the value of what they lost and begin rebuilding. Tim Sherer, 58, founder and co-owner of Goofy Foot Surf School, said his storefront, in a shopping complex built along the shore in Lahaina, had burned to the ground.

Sherer said he considered himself lucky. He escaped the fire unharmed and had heard that the newly constructed building where he’d recently bought a condominium — just next door to his business — was still standing. The condo complex was built from concrete; the shopping plaza where Goofy Foot rented space had been made of wood.

Sherer said he had time to go to Goofy Foot and save a few things before the fire reached it. In the hours before he evacuated, he said, he filled his van with boxes of photographs and some important papers.

“When I think back, if I knew it would burn down, I would have grabbed more,” he said.

His contact with private insurance companies will be minimal because he did not have property insurance for Goofy Foot, and the only insurance coverage he had on his condo came through his homeowners association.

Sherer is staying at a friend’s house on the other side of Maui. He said he had run into a dozen or so friends from Lahaina who were also trying to get help.

“Every time you see somebody that you know, there’s that sense of relief — like, the catchphrase over here is ‘I’m OK,’” Sherer said. “Compared to all of the people who lost lives and family members, I just lost some things.”

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