Steve Bowen, Chief Science Officer at reinsurance broker Gallagher Re, states that the wildfires in Los Angeles County, particularly the Palisades Fire and Eaton Fire, are projected to become some of the most expensive in history, with total aggregated insured losses expected “to notably” exceed the $10 billion mark.
The extent of damage, particularly from the Palisades and Eaton Fires, suggests that this figure could rise significantly once full damage assessments are completed and the percentage of affected properties within the fire perimeters—likely exceeding 50%—is determined.
Satellite imagery and initial ground reports suggest that an exceptional number of properties including single-family homes, commercial structures, and outbuildings, amongst others have been severely damaged or destroyed. For context, the 2017 and 2018 calendar year fire seasons in California each resulted in aggregated insured losses of roughly $20 billion (in today’s dollars), explains Bowen.
The current fires devastated several high-value neighbourhoods, with many destroyed properties individually valued in the millions of dollars. The average property values in some of the hardest-hit areas include Pacific Palisades ($3.5 million), Malibu ($3.2 million), and Altadena ($1.3 million). Properties that escaped structural damage are expected to incur additional losses from smoke-related impacts.
These preliminary estimates encompass losses covered by the private insurance market and California’s FAIR Plan. Individually, both the Palisades Fire and Eaton Fire are anticipated to rank among the top five costliest US-insured wildfires on record, based on nominal and loss-adjusted (2024 USD) values.
Since 1990, there have been 24 individual billion-dollar insured wildfire events globally, assessed using today’s dollar values. Of these, 21 occurred in the US, with two in Australia (the Black Saturday Bushfires in 2009 and the Black Summer Bushfires in 2019) and one in Canada (the Fort McMurray Fire in 2016).
In the US alone, 17 billion-dollar insured wildfire events have been recorded since 2015. Southern California has long been recognised as a high-risk area for urban conflagrations, though such events were historically considered low-probability scenarios.
However, the severity and simultaneous occurrence of multiple urban conflagrations during this outbreak will likely necessitate new approaches to risk assessment. Analysts will need to reevaluate the plausibility of previously considered “tail events” for this peril.
Bowen noted that winds across Southern California, frequently exceeding 50 to 80 mph during Santa Ana events, were the strongest observed in the region since 2011. These winds contributed to instances of non-fire-related wind damage.
Bowen stated, “We’ve now witnessed a multi-billion-dollar fire in Colorado in late December (2021). We’re witnessing multi-billion-dollar fires in California in early January (2025). The wildfire peril has become a calendar year risk. The idea of a traditional ‘fire season’ is no longer accurate as fire conditions are now becoming more amplified outside historically ‘seasonal’ fire months as precipitation patterns become more volatile.
“More people, and therefore exposure (stuff), keeps moving into the Wildland Urban Interface (WUI). Once combined with the climate change influence on fire weather conditions/behaviour, it leads to the potential of greater loss.”
To recap, extremely critical fire weather conditions across Southern California on January 7-10 led to wildfire causing exceptional property damage, particularly near the Pacific Palisades and the Pasadena and Altadena communities in Los Angeles County.
Reports suggest that the Palisades Fire and Eaton Fire have damaged or destroyed more than 12,000 structures, and it has been confirmed that at least 26 people have died from the fires.
Numerous analysts have now commented on the fires and potential losses to the insurance and reinsurance industry, with the latest reports suggesting a loss of more than $20 billion is now possible, and potentially higher if the fires continue to spread and containment efforts remain challenged by strong winds.
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