Insurers’ exit could make LA wildfire costliest in history.

Up in Flames

Up in flames… For days now, fierce wildfires have raged across the Los Angeles area, leading to at least six deaths and forcing tens of thousands of residents to evacuate. Thousands of acres have burned, along with thousands of structures like homes, businesses, and landmarks. The largest of the fires, which primarily affected the Pacific Palisades, is now the biggest in LA’s history.

• Historic heat: The blaze could be the costliest wildfire in US history, causing an estimated $20B+ in insured losses (or nearly double the cost of the last major blaze).

Policies in Peril

Policies in peril… California’s no stranger to wildfires, but a rise in global temps has made them more frequent and more severe. As a result, major insurers including State Farm and Nationwide have ditched the Golden State, cutting coverage and canceling home-insurance policies in high-risk areas to avoid paying pricey claims. Between 2019 and 2024, the 90272 ZIP code of the Palisades had 28 of every 100 policy renewals denied. Now, nearly 500K Californians rely on the state’s insurer of last resort, FAIR, which lets high-risk homeowners buy fire insurance.

The Stakes are Rising

The stakes are rising… Other high-risk states are under-insured for nearly all major climate disasters including fires, floods, and hurricanes. In Florida last year, Hurricanes Milton and Helene led to an estimated $300B in damages. Experts say there could be a $1T hole in US home insurance from hidden fire and flood losses. Over the past decade, extreme weather events have cost the economy more than $2T and are expected to get worse.