As firefighters make some progress containing the unprecedented blazes still tearing through the Los Angeles area, a clearer picture of the true extent of damage is emerging.
It’s bleak. The fires have killed at least 27 people and destroyed more than 12,000 structures, including many homes in Altadena and the Pacific Palisades. Early estimates from AccuWeather project total damages and economic loss at $250 billion.
Traditionally, home insurance has helped cover the majority of costs for covered property owners from disasters and bad weather. However, climate change is fueling a new era of so-called “unnatural disasters,” from supercharged storms to cataclysmic flooding, that are triggering major shifts in the insurance market across the United States.
In Los Angeles, home insurance premiums have surged in recent years as wildfire risk worsens. Some companies have pulled out of the region altogether. As the still-burning infernos continue to scorch properties, many are wondering how the insurance market will shoulder the price of losses without going bankrupt, but a newly implemented plan could pass along some of the costs to policyholders. Experts expect home insurance rates to rise even higher in the wake of the fires, which researchers recently concluded were exacerbated by climate change.
Insurance Insight: From 2011 to 2018, Dave Jones served two terms as the California insurance commissioner, where he regulated insurers amidst some of the state’s most destructive wildfires.
He’s seen firsthand how these infernos can throw the market into disarray.
“Insurers respond to increased losses in two ways: They raise price[s], and they reduce the amount of insurance they’re writing to reduce their exposure to losses—and they’re doing both,” Jones told me. He’s now the director of the Climate Risk Initiative at the University of California, Berkeley’s Center for Law, Energy and the Environment.
“Insurers are finding it increasingly difficult, even at the highest prices, to make a profit,” he added. “They are reducing the writing of insurance in various places, and that phenomenon is only going to continue as climate change accelerates and as we have even more severe and frequent weather-related events.”
In 2018, California’s most destructive fire—dubbed the Camp Fire—ripped through the northern town of Paradise, incinerating more than 18,000 structures. But the current fires in greater LA are shaping up to be the costliest in the state’s history because they have burned some of the most expensive areas in the city. That includes the Pacific Palisades, where the median home price is around $4.7 million, according to Realtor.com. As a result, insured losses are projected to be astronomical, with early estimates of up to $30 billion.
Property owners covered by private insurance companies are set to receive reimbursement under claims based on their policies. But many homeowners in LA County have had
