For the past three decades, Nancy Wallace, a professor of finance and real estate at UC Berkeley’s Haas School of Business and a former adviser to the U.S. Treasury Department and Federal Reserve, has been channeling her harrowing escape from the 1991 Oakland Hills Firestorm into groundbreaking research on climate risk, as detailed in a recent NPR piece.

The fire, which killed 25 people and destroyed nearly 3,000 homes, spurred Wallace to investigate how extreme weather events like wildfires threaten housing, real estate, and insurance markets. Her work combines digitized mapping and financial data to assess these risks, uncovering vulnerabilities in fire insurance and mortgage systems.

Wallace’s research reveals alarming trends in California’s fire-prone housing markets. Insurance companies are canceling policies or raising premiums for high-risk areas, leaving millions of homeowners unprotected. Yet rebuilding continues in these zones, often with larger, more expensive homes. Wallace’s team discovered that wildfires act as a gentrifying force, increasing property values within five years of a fire.

To combat these issues, Wallace advocates for a shift from outdated, deterministic insurance pricing to probabilistic models that account for future climate risks. By modernizing how risks are priced and managed, Wallace aims to stabilize markets, protect homeowners, and confront the escalating impacts of climate change on housing and insurance.

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