California Wildfires Will Likely Lead to Large Economic and Insured Losses

Active wind-driven wildfires in Southern California that are estimated to have burned more than 1,000 properties and prompted evacuation orders for more than 80,000 residents will likely lead to what industry watchers say will be sizable insured losses.

With the number of burned properties, including in one of the area’s highest value neighborhoods, in just one day the fires may push insured losses to levels not seen in more than a half-dozen years, according to a catastrophe modeler.

Most agree that losses from the fires, which have have collectively burned more that 20,000 acres, will be quite large.

J.P. Morgan says insured losses from the wildfires could approach $10 billion, Reuters is reporting. AM Best said it expects that “insured losses will be significant.” AccuWeather on Wednesday issued a preliminary estimate for the total damage and economic loss that ranges from $52 to $57 billion.

Hurricane-force wind gusts of as much as 86 miles per hour pushed flames through high-priced neighborhoods and hampered efforts of firefighters to fight the fires, prompting evacuation orders for thousands.

Two people have reportedly died in the fires.

The largest fire is the Eaton Fire in Altadena, which grew to 10,600 acres in one day. The Palisades Fire has burned 2,925 acres, and poses a significant threat to homes in the Pacific Palisades area of Los Angeles. The Hurst Fire in Sylmar is currently burning around 500 acres. All the fires are 0% contained, according to CalFire.

The National Weather Service issued a Red Flag Warning for Los Angeles and Ventura Counties. The Santa Ana winds driving the fires occur periodically, but the current wind conditions have been exceptionally strong.

“High winds and low relative humidity will continue critical to extremely critical fire weather in southern California through Thursday,” an NWS update states.

The skies in the region have turned grey with smoke and ash. Southern California Edison also turned off the power to more than 114,000 customers as a public safety measure.

L.A. County Fire reported more than 1,000 properties have been destroyed, a figure that appears likely to rise given the lack of containment on the blazes and the forecast for more severe winds.

“We’re continuing to see 50-, 60-, 70-, 80-mile-per-hour offshore wind gusts blowing down from the mountains,” said Jon Schneyer, director of catastrophe response for CoreLogic. “I don’t imagine containment is going to occur anytime in the next two or three days, right? We might get a little bit, but to get up to 60, 70% containment will probably be several days until the wind shifts to more of an onshore wind pattern.”

Schneyer said he’s seeing assessed values of homes in the Palisades Fire at around $10 million.

“Obviously to get a sense of what the insurable or insured loss estimate is too early,” he said, adding that with the value of the homes in the burn area will likely push insured loss estimates upward.

“This is the worst wildfire event we’ve had to reckon with since the 2018 period,” he said. “The last five, six, seven years has been relatively low impact. This could be an event that brings us back to the 2015-2018 time period.”

State Farm, Farmers, Liberty Mutual, CSAA Insurance Group, Mercury Insurance Group and Allstate Insurance Group are the state’s biggest homeowners insurers, according to AM Best.

Sridhar Manyem, AM Best’s senior director, industry research and analytics, noted that the fires occurred outside of what has traditionally been considered wildfire season in California—however, the state’s season has in recent years expanded from a few months to several months.

“We expect that insured losses will be significant though it is early to define the magnitude,” stated Manyem. “The high value of real estate in some of those areas will likely generate large economic losses with insured losses depending on the respective coverage. On the back end, demand surge and rising inflationary pressures are additional factors that could drive claims-related costs upward.”

He said AM Best will monitor the situation through interactions with rated insurers to assess the impact on financial strength ratings.

Federal assistance has been secured for the fires. More than 700 personnel have been assigned to the Eaton Fire, while airtankers from throughout the state are being deployed to help.

The Palisades Fire may be one of the trickiest to combat.

“Extreme fire behavior, including short and long-range spotting, continues to challenge firefighting efforts for the Palisades Fire,” a CalFire update states. “Winds gusts up to 60 MPH are expected to continue through Thursday, potentially aiding in further fire activity and suppression efforts.”

The Hurst Fire, while currently small by comparison, “is spreading rapidly under high winds, creating dangerous conditions for nearby communities,” according to CalFire.

Top photo: The Palisades Fire started in the Los Angelas area on Jan 7, 2025. Source: CalFire.