Los Angeles wildfires could cost insurers tens of billions of dollars while leaving homeowners across California with higher premiums and fewer options.
Key Facts:
• Analysts from Wells Fargo now predict insurance losses may reach $30 billion, surpassing last week’s $20 billion estimate.
• More than 24 people have lost their lives, and at least 12,000 buildings have burned in the Pacific Palisades and Altadena areas.
• Accuweather expects total economic losses—including uninsured damage—to land between $250 billion and $275 billion.
• Consumer Watchdog warns that if the FAIR Plan’s funds run short, all California homeowners could face surcharges ranging from $1,000 to $3,700 or more.
The Rest of The Story:
The fires have persisted for over a week, fueled by wind gusts that make them harder to contain. Wells Fargo analysts identified major insurers—Allstate, Chubb, AIG, and Travelers—as holding the greatest financial exposure among the companies it covers, while Mercury General and Cincinnati Financial also stand to face large losses.
Even more troubling, the FAIR Plan, a backup policy for those who cannot find private insurance, may lack sufficient funds to handle the claims. Officials say it holds about $200 million in cash and access to $2.5 billion in reinsurance, but total exposure in vulnerable areas like Pacific Palisades is much higher.
Further complicating matters, investigators are examining whether an electrical tower caused the Eaton fire in Altadena, which could involve the state’s utility wildfire insurance fund.
Commentary:
Californians living in fire-prone neighborhoods are already dealing with expensive or even unavailable homeowner insurance. With the massive losses from these wildfires, many can expect extra fees, rising premiums, and the possibility of canceled policies if companies decide to pull out of high-risk areas.
The woke policies embraced by California and Los Angeles, including limited forest management and broad environmental restrictions, have contributed to this crisis.
Governor Newsom cut $100 million in fire prevention spending this year….. all while allocating $3 BILLION DOLLARS on free healthcare for illegals pic.twitter.com/FNw1Ffdhyz
— End Wokeness (@EndWokeness) January 12, 2025
Homeowners are left holding the bag because insurers either refuse coverage or charge exorbitant rates. These wildfires have turned a difficult situation into a genuine disaster for property owners across the state.
The Bottom Line:
California’s latest wildfires are placing historic financial pressure on insurers, and residents should prepare for higher rates or lost coverage.
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With billions in damage, the state’s insurance market faces an even tougher road ahead.