Los Angeles wildfires (January 2025)
Urban wildfires that broke out in January 2025 in the Los Angeles area, destroying more than 16,000 structures and forming the costliest wildfire in insurance history.
On 7 January 2025, driven by exceptional Santa Ana winds after a long dry spell, several fires broke out in the Los Angeles area. The two largest, in Pacific Palisades and Altadena, swept through dense residential neighborhoods and destroyed more than 16,000 structures; some thirty people died. Modelers' insured loss estimates range from 25 to 45 billion dollars, making it the costliest wildfire ever recorded for insurance. The event laid bare the crisis in the California market. For several years, insurers had been cutting back underwriting in exposed areas, because regulation limited their rate increases and barred them from pricing with forward-looking catastrophe models. Many homeowners had moved to the public plan of last resort, whose exposure had soared; after the fires, the plan had to call one billion dollars from market insurers. The state had launched a reform to allow catastrophe models and the cost of reinsurance to be taken into account in exchange for underwriting commitments in high-risk areas. For the analyst, the episode illustrates the boundary between natural and political risk: price regulation can make a risk uninsurable as much as climate can.
An Altadena homeowner, non-renewed by his insurer in 2023, had insured with the public plan with a limit too low to rebuild. His house destroyed, he receives the capped indemnity; rebuilding costs, pushed up by post-fire demand, exceed what he receives by 40 percent.
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