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Los Angeles Wildfires

Insured losses from LA’s fires could be upwards of $30 billion, industry trade rep says

Nova Safo and Ariana Rosas Jan 15, 2025
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A firefighter walks past homes destroyed in the Palisades Fire on Jan. 13. Mario Tama/Getty Images
Los Angeles Wildfires

Insured losses from LA’s fires could be upwards of $30 billion, industry trade rep says

Nova Safo and Ariana Rosas Jan 15, 2025
Heard on:
A firefighter walks past homes destroyed in the Palisades Fire on Jan. 13. Mario Tama/Getty Images
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With dangerously high winds back in the forecast for Southern California on Thursday, an estimated 12,000 structures have been destroyed thus far. The totals and magnitude of the loss could be staggering, and are only projected to grow as the firefighters struggle to contain the devastation.

Karen Collins is with the American Property Casualty Insurance Association, an industry trade group. She spoke with Marketplace’s correspondent Nova Safo about the scale of the loss. The following is an edited transcript of their conversation.

Nova Safo: Is there at all an estimate, at the moment, of the insured losses in the Los Angeles area?

Karen Collins: This wind and fire event is certainly on a massive scale, and the scope of the damage is still unclear, as the fire is still burning. But we have seen some preliminary loss estimates that could push this upwards of $30 billion in insured losses, which certainly could make this the costliest insured loss due to wildfires in history globally.

Safo: Put that into context for us: Are there other types of disasters where the insurance industry has recently had to face that level of loss?

Collins: Our industry plans for major events like this, and we certainly have dealt with disasters of this magnitude. The costliest global insured loss of that is actually Hurricane Katrina, which ravaged the state of Louisiana in 2005 and, in today’s dollars, I believe that is upwards of close to $100 billion adjusted for inflation.

Safo: So if there’s good news — if we can call it that — is that this seems like an absorbable amount of insured loss for the industry in California?

Collins: So the state of California’s property insurance market, it has had some challenges. It’s been in crisis for several years, because of the state’s outdated regulatory system, which has unfortunately not allowed insurers to charge rates that are commensurate with the increasing risk of wildfire and other extreme events. We do have capital in place, at risk transfer mechanism through things such as reinsurance. But again, it’s too early to speculate the full extent of damage and what that impact to the insurance market itself will ultimately be.

Safo: I mean, we’ve seen wildfires devastate communities. You know, usually they are in urban-rural interface areas. Here we’re talking about completely suburban and urban areas in Los Angeles that are burning. And I’m wondering if that at all changes the economics of underwriting housing insurance for the industry.

Collins: Absolutely. As we have done in a number of states, more community growth into our natural environment, as more people live in these wildfire-prone natural environments, we can see ignitions that occur there, but then they may spread into our built environments. If we are going to prevent this level of devastation, we have to take a different approach with our built environment. What do we do within communities to strengthen and make more resilient our homes, our businesses, our infrastructure, so that as we see these types of heavy rainfall events and growth of fuels, but then the drought cycles that follow and create that fuel for fire, and then certainly, as we have more atmospheric and climate change is more intense — storm events, wind events — we need our communities to be able to withstand these in all forms, so that when fires do come through — which, again, these are regions that are prone and that is a natural part of the ecosystem cycle — but we need to anticipate and manage the fuels in the wild lands that are adjacent to communities, particularly, but then also the fuel sources that make fire too hospitable to come in and ravage these communities.

Safo: And those changes aren’t going to happen overnight. And I’m wondering, as we move forward, will the industry be pulling out of more of LA or will the price of buying insurance in the rebuilt homes in Altadena and Pacific Palisades be overly prohibitive?

Collins: You know, insurers certainly do remain committed to our customers in California and very importantly to working with the insurance commissioner, the governor’s administration, legislative leaders on what are going to be immediate and long-term solutions needed to address the current crisis and from a long-term standpoint certainly restore a healthy and sustainable insurance market in California.

Safo: Finally, I wanted to ask you about the victims who are right now looking to rebuild their lives. When might payouts start going out? What should we expect to see in the days and weeks ahead?

Collins: You know, for folks that have been impacted, obviously, the first step is getting contact with your insurance company to get that claims process started. For homeowners, you have temporary housing coverage benefits that you may have available to you for both, not just evacuation-related expenses if you’re under mandatory evacuation for up to a couple weeks, there may be benefits there. And certainly, as you are rebuilding, if your home has been impacted, those additional living expenses may help cover some of those expenses while you are out of your home or if it’s uninhabitable, and so we recommend keep your hotel and meal receipts. There’s business property insurance. We have a lot of business owners that have been impacted by this, and if you have business property coverage, we recommend you make a list as soon as possible of your inventory that might have been damaged or destroyed. If you’ve been closed due to the wildfires, because of loss of power. For example, you may have business interruption coverage available under your policy. So again, the best advice is talk to your agent or company. These events, as we’ve seen in California and other states — this is going to take some time.

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