The number of lives lost and amount of property damage from the Los Angeles wildfires is rising daily. Although cost estimates of the damages are preliminary and losses continue to mount, the Associated Press (AP) is already reporting that they are likely to be among the costliest natural disasters in U.S. history. CoreLogic Senior Director Tom Larson expects the fires to be “the most expensive in the state’s history with effects on the insurance industry that will persist into the future.”
Economic losses are already estimated to be between $135-$150 billion, according to Statistica, while Insurance Journal reported up to $40 billion in estimated insured losses. CoreLogic announced preliminary residential and commercial loss estimates for the ongoing Eaton and Palisades Fires of “between $35 to $45 billion.” The Palisades fire was 75% contained as of January 23, 2025 while the Eaton fire was 95% contained. CoreLogic will provide final insured loss estimates once the fires have been fully contained. The majority of losses are to residential properties.
For context, total economic losses from 2020–24 were $43 billion, and insured losses over $24 billion, according to Partner Re.
Despite the containment of the Eaton and Palisades fires, mudslides could cause further property losses with rain expected over burnt hillsides. Meanwhile, north of Los Angeles the Hughes fire, spanning 10,000 miles broke out on January 22, 2025.
"Our sympathies go out to all impacted by the devastating Los Angeles wildfires. From an industry perspective, this is an event that is largely unprecedented at least in scale and magnitude for wildfires. While the industry as a whole has sustained larger insured loss natural catastrophes, there are many lessons to be learned and probable counter-actions capital providers will take." Jon Drummond, Head of Broking, WTW North America
“Our sympathies go out to all impacted by the devastating Los Angeles wildfires. From an industry perspective, this is an event that is largely unprecedented at least in scale and magnitude for wildfires. While the industry as a whole has sustained larger insured loss natural catastrophes, there are many lessons to be learned and probable counter-actions capital providers will take.”
Jon Drummond | Head of Broking, WTW North America
Although wildfires are relatively common in California, they are typically confined to far less densely populated areas than Los Angeles County. The fires have already destroyed more than 12,000 structures, including many multimillion-dollar homes, according to AP.
Unlike floods, which aren’t covered under typical property insurance policies, wildfires are usually covered. Though it remains impossible to estimate the full scale of the damage while the fires still burn, we know that the wildfires will have a significant impact on more than one line of insurance.
Given the extensive damage to residences and vehicles, the wildfires will likely exacerbate an already challenging home and auto insurance market in California. Numerous admitted insurers had already been leaving the state over the past few years, leaving carriers to move to non-admitted excess and surplus markets. Carriers were already being more selective, with several limiting what they would underwrite. Many homeowners were already challenged to find affordable coverage, given high home values and limited capacity.
California’s FAIR plan, which provides up to $3 million in coverage, offers homeowners limited relief. Many of the Los Angeles homes already lost exceeded $10 million in value.
The FAIR Plan is under stress and might not be able to cover its full exposures due to the magnitude of the losses, S&P reported. Such a shortfall could have implications for FAIR plan member insurers and their policyholders. Insurers could be required to pay supplemental assessments fees to cover the shortfall. A portion of those fees could be passed on to policyholders, according to S&P. How these assessments are implemented is up to the state’s insurance commissioner, so details remain unclear.
The California Department of Insurance published an FAQ clarifying its position on the recoupment of FAIR Plan assessments from member insurers’ policyholders.
Though most of the damage so far has been to homes and vehicles, area businesses have been destroyed or forced to close. The fires will also likely force businesses to temporarily close, resulting in business interruption losses.
Property damage can also lead to casualty claims if injuries or deaths are alleged to have resulted from negligence. Given the legal and regulatory climate in California, liabilities are likely to arise from the fires as investigations play out. Though ultimate liabilities remain unclear, wildfire coverage in the state was already extremely limited for those with tier-one or tier-two exposures.
Capacity for wildfire coverage, which is often extended by omittance of a wildfire exclusion, has fallen over the last several years. Industry losses associated with recent events, including the Butte Fire (2015), North Bay Fires (2017) and the Camp Fire (2018) were significant. The market responded with exclusions or by mandating significant retentions for tier-one or tier-two exposures.
Depending on the outcome of the investigations, we may see inverse condemnation claims as well. Generally speaking, inverse condemnation allows plaintiffs to recover when their property is “taken” (or, in the case of a fire, damaged or destroyed) in the course of public use or improvement. Somewhat unique to California, the doctrine has been applied to public utilities (tier-one exposure) even when the utility is not a government entity. Those utility companies also contract out services, e.g. brush removal, to third parties (tier two exposure) that might contractually assume some of the liabilities otherwise reserved for the utility itself. Inverse condemnation only requires strict liability, not negligence, so common defenses to liability such as acting reasonably are often not applicable.
For additional insights on property insurance considerations, read Los Angeles wildfires: Property insurance coverage considerations.
We are monitoring the financial impact of the wildfires on property and casualty insurer ratings. There are still many unknowns as the situation is still fluid, but rating-agency reactions to date have been mild. S&P Global Ratings (January 9, 2025) and Fitch Ratings (January 13, 2025) reported that they don’t expect the fires to affect ratings of the insurers within their coverage.
S&P said that its “rated primary insurers can bear the brunt of the LA wildfire losses, after strong results in the first nine months of 2024… combined with a material reduction in policy coverage in wildfire prone areas in California.” On the other hand, “insurers with less robust capital and more concentrated exposure, particularly in Southern California, could face earnings and potential capital pressure, especially if natural catastrophe losses exceed 2024.”
Those affected by the wildfires should file timely claims with insurers and communicate with them and brokers regularly to help ensure priority of coverage when facing large losses.
WTW will continue to monitor the crisis in California and update this page as new resources are developed.
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein isn’t intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you’d like more information regarding your insurance coverage, please don’t hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
