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Increasingly frequent catastrophic events like the California wildfires are adding more risk into the historically lower-risk municipal bond market, potentially impacting investor decisions in the future, according to Tom Kozlik, head of public policy and municipal strategy at HilltopSecurities.

“From an investment perspective, investors are not expecting a high yield because there’s supposed to be less risk in the municipal bond market,” Kozlik said. “If they are not compensated for that risk, they won’t invest in bonds in those areas.”

According to two municipal bond credit analysts familiar with California cities, these wildfires raise a level of concern and will be “monitored.” While there isn’t an imminent credit risk, close attention is being paid to how property and casualty insurers respond going forward.