With aerial firefighting returning as strong Southern California winds died down for a bit, damage assessments from a handful of destructiveLos Angeles area blazes are sure to become clearer—likely pushing up billion-dollar-plus insured loss estimates put forth from fires that areonly three days old.
What isn’t clear is the air, which is thick with choking smoke in areas throughout Southern California. Also unclear is just how many homeshave been lost and the magnitude of insured losses. Insured loss estimates currently range from $8 to $20 billion.
Reports on the number of structures burned continue to rise too quickly to put out an accurate count that lasts beyond a quick read. EarlyThursday reports stated more than 1,300 structures were reported to have burned, and by mid-morning Pacific Time there were reports thatmore than 2,000 structures in the Pacific Palisades fire alone have been destroyed.
Thousands more structures are threatened by at least five fires across the bone-dry area, which hasn’t received any large rainstorms since thespring and early summer of 2024.
The fires have torched more than 45 square miles and forced the evacuation orders for more than 180,000 residents. Five people are reporteddead.
Winds in the 80-mph range have driven up the size fires in just a few days.
The National Weather Service issued a Red Flag Warning for Los Angeles and Ventura Counties. The Santa Ana winds driving the fires occurperiodically, but the current wind conditions have been exceptionally strong.
Los Angeles Mayor Karen Bass on Thursday gave hope for more effective firefighting efforts, saying that reduced winds were enabling aerialwater drops to resume. That may lead to new loss estimates soon, which have already been strikingly high considering the fires have only beenburning for just over two days.
AccuWeather on Wednesday issued a preliminary estimate for the total damage and economic loss that
ranges from $52 billion to $57 billion
.
Preliminary estimates point to total insured losses exceeding $8 billion depending on the final number of properties being affected by thewildfires, Morningstar DBRS Research said on Thursday.
Jon Schneyer, director of catastrophe response for property intelligence firm CoreLogic, cautioned about issuing estimates, but he said hewouldn’t be surprised to see the insured loss figure rise to $10 billion.
He used the 2018 Campfire as a baseline. The Southern California fire burned 18,804 structures and resulted in roughly $10 billion in insuredlosses at the time. The reconstruction cost of homes in the Camp Fire ranged around $500,000.
The Palisades Fire started in the Los Angeles area on Jan 7, 2025. Source: CalFire.
The ongoing blazes are in areas with multiple $1 million properties, and Schneyer said he’s seeing assessed values of homes in the PalisadesFire at around $10 million.
“Ten billion dollars is a pretty good baseline number to go on,” he said. “Now, that’s not modeled. We have not calculated model loss given thatthe fires are still raging. In 12 hours, I could be dead wrong.”
The figures could easily be higher. Verisk is estimating the insured exposure from properties in the burn area of the Palisades Fire at $15 billion.
“From the latest perimeter issued by Calfire as of Thursday morning, Verisk estimates that at least $15 billion in insurable exposure lies withinthe Palisades fire perimeter and is therefore potentially at risk,” the firm stated in a note sent out to the media. “Please note that this is not anestimate of insured or economic losses, but just an estimate of property value that could be damaged by the Palisades fire.”
While it’s unclear just how many properties have been lost in the Palisades Fire, indications are that it could be at least 1,000 have beendamaged for destroyed.
ICEYE analyzed more than 5,000 buildings in the area of the fire and found that more than 1,500 of the buildings are likely damaged.
The Wall Street Journal is reporting insured losses for all the fires could cost insurers $20 billion.
Without putting numbers on insured losses, the Palisades Fire will likely make history, said Dan Ward, atmospheric scientist for modeler KarenClark & Company.
“Our view is that the Palisades Fire will probably be the costliest wildfire in Southern California history and it’s possible that it’s the costliest inU.S. history,” Ward said.
He said the modeler is not offering insured loss estimates yet, but that it plans to do so.
Even with the losses mounting, Morningstar DBRS said it expects the wildfires “to have a negative but manageable impact on major propertyinsurers active in the California market.”
Morningstar said the impact should be “somewhat mitigated by their use of reinsurance and their high degree of diversification. Similarly,losses should be manageable for the global reinsurance industry and not affect their credit profiles.”
Moody’s has also estimated the losses in the billions, but it said they’ll be well spread out among the industry.
“We would expect insured losses to run in the billions of dollars given the high value of homes and businesses in the impacted areas,” statedJasper Cooper, vice president-senior credit officer, Moody’s Ratings. “Losses will be shared among standard homeowners insurers, insurersspecializing in high-value E&S homeowners policies, and the California FAIR plan. In addition, commercial property losses could besignificant.”
The biggest fire is Palisades Fire north of Los Angeles. It has grown to cover nearly 17,234 acres. The Eaton Fire in Altadena has burned morethan 10,600 acres and local officials are reporting the blaze has destroyed nearly 1,000 structures. Both fires are 0% contained, according toCalFire.
The Hurst Fire north of San Fernando has burned 671 acres and is 10% contained. The 348-acre Lidia Fire in the Canyons near Acton is 40%contained. The Sunset Fire, which broke out Wednesday evening in Hollywood Hills and is threatening local landmarks, is 43 acres and is 0%contained.
The rapid spread of the fires is what’s making battling the blazes tough, and it’s what’s making loss estimates so difficult to put a finger on.
Schneyer with CoreLogic said he looked at the number of structures within the Palisades Fire perimeter at 2 a.m. EST and identified 1,600structures.
“Twelve hours later that was 9,700 structures within the wildfire perimeter, so it’s changing quite rapidly, and that’s just for one of the fires,”Schneyer said.
Going forward, he said better modeling could help the state’s insurance market in situations like this. Until now, the state’s landmark insurancelaw, Proposition 103, has prevented insurers from using catastrophe models as a ratemaking factor.
As wildfires have worsened in the state in recent years—CalFire data shows that seven of the state’s 10 most destructive wildfires haveoccurred in the last 10 years—carriers began pulling back from the state’s homeowners market, blaming wildfire losses as well as regulations.They also began requesting steep rate increases.
State Farm applied for large rate increases in California, a year after the carrier got rate approvals of 7% and 20%. The insurer, the largest inCalifornia, insures nearly one-in-five homes in the state. It recently requested
a 30% rate increase for its homeowners line
, a 52% rate increasefor renters and 36% rate increase for condo coverage.
Allstate, which stopped issuing new California homeowners insurance policies in 2022, is
seeking an increase in its California homeownersinsurance premiums
by an average of 34%. It would be the largest rate increase this year and would impact more than 350,000 policyholders.
In response, California Insurance Commissioner Ricardo Lara introduced his so-called Sustainable Insurance Strategy to increase coverage inwildfire-distressed areas of the state. Lara in December announced
a catastrophe modeling and ratemaking regulation
that will allow carriers touse the models as a factor in setting and getting rates.
Under Lara’s new regulation, major insurance companies must increase the writing of comprehensive policies in wildfire distressed areasequivalent to no less than 85% of their statewide market share. Smaller and regional insurance companies must also increase their writing.
That fact that L.A.’s flash conflagration is a function of the Santa Ana winds is being well reported, but Karen Clark & Company’s Ward saidthere were “three main ingredients” that made the unfolding catastrophe.
“First, abundant vegetation buildup, so lots of fuel available in this part of California. It was a very rainy 2023, and in the first part of 2024 aswell, and that builds up all this fuel, the chaparral in this area, which is very flammable,” he said.
A wet 2023 and early 2024 was followed by an extremely dry fall.
“Essentially there has not been any rainfall in that part of the state going back to the summer, so you have plentiful and dry fuel,” Ward said.“And the final ingredient is the most important and that of course is the unusually intense and persistent Santa Ana wind event that began earlierthis week and brought extremely high winds to the entire L.A. County area.”
Santa Ana winds are not unusual in California this time of year. The difference this time was how strong the winds were, with gusts exceedinghurricane forces, as well as how widespread the winds were.
“It wasn’t a localized event, it really covered the entire Los Angeles area,” Ward said. “The last time we had a Santa Ana wind event of thismagnitude impacting L.A. was back in 2011.”
Top photo: The Palisades Fire started in the Los Angeles area on Jan 7, 2025. Source: CalFire.
