The fires that erupted across Los Angeles County are still raging, but already are projected to be among the costliest natural disasters in America’s history.
While it’s still too early for an accurate tally of the financial toll, the losses so far likely make the wildfires the costliest ever in the U.S., according to various estimates, leaving behind devastation that will ripple far beyond California’s borders.
With tens of thousands of displaced LA residents who have lost all but the clothes they were wearing, plus a few select personal items, insurance companies will be on the hook for colossal payouts.
It will inevitably lead to a rise in insurance premiums for Americans across the country as companies work out how they can best pay out claims.
With losses surpassing a staggering $135 billion, according to a preliminary estimate by AccuWeather, the aftermath of this inferno is set to burden federal programs, strain insurance markets, and reshape the lives of Americans nationwide.
But only once the ashes settle will the true cost of the economic and social fallout become clear.
The fire, which engulfed some of America’s wealthiest neighborhoods, has already left thousands scrambling for answers – and funds – to rebuild their lives.
The devastating blazes have killed at least 16 people and incinerated more than 12,000 structures since Tuesday, laying waste to entire neighborhoods once home to multimillion-dollar properties.
Insurance is expected to cover just $20 billion of the estimated losses, according to JPMorgan Chase.
That leaves $115 billion in uncovered costs, setting the stage for a patchwork of federal aid, personal savings, and charitable contributions to fill the gap.
The LA fires that erupted this week across Los Angeles County are still raging, but already are projected to be among the costliest natural disasters in U.S. history. Pictured, Pedram Salimpour and Stacy Weiss look through the remains of their home, which was destroyed in the Pacific Palisades neighborhood
The devastating blazes have killed at least 16 people and incinerated more than 12,000 structures since Tuesday, laying waste to entire neighborhoods once home to multimillion-dollar properties. Pictured, a view of burned houses at Malibu Beach that burned during Palisades wildfire in Malibu
Though Altadena has never experienced fire devastation on this scale in the past, the suburb does sit at the base of the San Gabriel Mountains, which are prone to wildfires. This has made getting fire insurance more difficult.
Many residents in Altadena, a racially and economically diverse suburb, are covered by the California FAIR Plan, an insurance program backed by the state of California that is used by property owners who cannot find private market coverage.
As private insurers have rejected or dropped homeowners in fire-prone areas of California, residents have increasingly switched to FAIR Plan, data shows.
As of the end of September last year, 958 homes in Altadena were covered by the scheme, up 28 percent from a year earlier, according to data from the insurer.
In Pacific Palisades, a wealthy suburb west of downtown Los Angeles ravaged by wildfires this week, the rise in the use of the FAIR plan has been more stark.
There are 1,430 homes covered under the scheme, up 85 percent from a year earlier and quadruple the number in 2020, the insurer’s data showed.
But for many, rebuilding won’t be easy. A 2023 survey by the Insurance Information Institute and Munich Re found that 12 percent of U.S. homeowners don’t carry home insurance, and those who do often find their coverage woefully inadequate.
In areas like Pacific Palisades, where homes average $3.4 million, policies from California’s last-resort FAIR Plan cap damages at $3 million — a glaring shortfall in the face of soaring property values.
While it’s still too early for an accurate tally of the financial toll, the losses so far likely make the wildfires the costliest ever in the U.S. Pictured, a firefighter battles the Palisades Fire in Mandeville Canyon on Saturday
With losses surpassing a staggering $135 billion, according to estimates, the aftermath of this inferno is set to burden federal programs, strain insurance markets, and reshape the lives of Americans nationwide. Pictured, the devastation from the Palisades Fire is seen from the air
Only once the ashes settle will the true cost of the economic and social fallout become clear. Pedram Salimpour and Stacy Weiss stand on the remains of their home in the Palisades
State Farm’s recent decision to stop renewing policies for 30,000 homeowners in fire-prone California further complicates matters.
Pacific Palisades, one of the neighborhoods hardest hit by the fire, has already seen 69 percent of its residents lose access to State Farm policies.
The FAIR Plan, while a stopgap solution, is under immense pressure, raising concerns about its ability to sustain payouts amidst increasingly frequent and severe disasters.
The Federal Emergency Management Agency (FEMA) has also stepped in, offering temporary shelter and financial assistance.
However, FEMA’s maximum payout of $43,600 per household barely scratches the surface of the costs for homeowners in areas like Altadena and Pacific Palisades, where home prices have doubled in the past decade.
Madison Sloan, director of the disaster recovery and fair housing project at Texas Appleseed, emphasized the limitations to WSJ.com: ‘Even if you get the full amount of housing assistance, that’s not going to rebuild a house.’
For long-term rebuilding, FEMA relies on Congress to appropriate funds through Community Development Block Grants.
But this process can be agonizingly slow. After Hurricane Sandy in 2012, it took Congress three months to approve aid, while funds for rebuilding Maui’s Lahaina -devastated by wildfires in 2023 – took a year and a half to materialize.
The fire, which engulfed some of America’s wealthiest neighborhoods, has already left thousands scrambling for answers – and funds – to rebuild their lives. Pictured, Water is dropped on homes as the Palisades Fire advances in Mandeville Canyon on Saturday
A resident of Pacific Palisades rides his bike on the streets and on his way to his destroyed house
Houses are reduced to ashes due to the fire in Pacific Palisades. In the aftermath of the devastating wildfire in Pacific Palisades, which ultimately consumed more than 22,000 acres, the community is left grappling with the destruction
The impacts of these fires won’t remain confined to California.
Rising insurance premiums, reduced availability of coverage in high-risk areas, and increased federal disaster spending will affect taxpayers and policyholders nationwide.
But even before the fires, many Californians were grappling with insufficient insurance coverage.
A 2021 study of Colorado’s Marshall Fire revealed that 36 percent of homeowners discovered their policies covered less than three-quarters of their replacement costs.
Similar gaps have emerged after tornadoes in Kentucky and Tennessee, where deductibles left some families with thousands of dollars in out-of-pocket expenses.
The situation is particularly dire in mobile-home parks like Pacific Palisades Bowl Mobile Estates, which was destroyed in the fire.
Mobile-home insurance is less common, leaving many residents with no safety net to rebuild.
Moreover, the rebuilding process could reshape swaths of Los Angeles, as some residents, overwhelmed by the costs, choose to sell their land.
This pattern is not unprecedented. After Hurricane Sandy devastated New Jersey’s coastline in 2012, many long-time residents sold their properties to wealthier buyers. Jody Stewart, a resident of one such area, lamented,
The light of a fire fighting helicopter illuminates a smouldering hillside as the Palisades fire grows near the Mandeville Canyon neighborhood and Encino, California, on Saturday
Cars are destroyed due to the fire in Pacific Palisades
Water is dropped on the Palisades Fire by helicopter in Mandeville Canyon on Saturday
“That was a hardworking community at one point of regular people… Now, 65 of the 70 homes on my street changed hands,’ Stewart told the Wall Street Journal.
The L.A. County wildfires, which were fueled by hurricane-force Santa Ana winds and an extreme drought, remained largely uncontained on Saturday.
That means the final tally of losses from the blazes is likely to increase, perhaps substantially.
Private forecaster AccuWeather estimated the damage and economic loss from the fires at $135 billion to $150 billion, portending soaring homeowners’ insurance costs.
‘This will be the costliest wildfire in California modern history and also very likely the costliest wildfire in U.S. modern history, because of the fires occurring in the densely populated areas around Los Angeles with some of the highest-valued real estate in the country,’ said Jonathan Porter, Accuweather’s chief meteorologist.
‘To put this into perspective, the total damage and economic loss from this wildfire disaster could reach nearly 4 percent of the annual GDP of the state of California,’ Porter said.
AccuWeather factors in a multitude of variables in its estimates, including damage to homes, businesses, infrastructure and vehicles, as well as immediate and long-term health care costs, lost wages and supply chain interruptions.
Nine of the top home insurance companies in California were contacted for comment.
State Farm, Nationwide, Allstate, Mercury, Liberty Mutual and Farmers responded with statements saying they were working with policyholders to help them make claims, without addressing specific concerns about residents not receiving sufficient payouts or rising future premiums.
Houses are reduced to ashes due to the fire in Pacific Palisades. Thousands of homes, businesses, and vehicles were reduced to ashes, leaving residents displaced and heartbroken
Pedram Salimpour and Stacy Weiss look at the remains of their home in the Pacific Palisades neighborhood in Los Angeles, California on Saturday
Earlier his week, California Insurance Commissioner Ricardo Lara invoked moratorium powers to suspend all policy non-renewals and cancellations from insurance companies for one year.
Lara said in a statement on Friday that next week he will host free insurance workshops in Santa Monica and Pasadena, suburbs close to the two biggest fires.
In a report issued on Friday, Moody’s also concluded that the wildfires would prove to be the costliest in U.S. history, specifically because they have ripped through densely populated areas with higher-end properties.
While the state is no stranger to major wildfires, they have generally been concentrated in inland areas that are not densely populated.
That’s led to less destruction per acre, and in damage to less expensive homes, Moody’s noted.
That’s far from the case this time, with one of the largest conflagrations destroying thousands of properties across the Pacific Palisades and Malibu, home to many Hollywood stars and executives with multimillion-dollar properties.
‘The scale and intensity of the blazes, combined with their geographic footprint, suggest a staggering price tag, both in terms of the human cost and the economic toll,’ Moody’s analysts wrote.
The report did not include a preliminary cost estimate of the wildfire damage and it could be several months before a concrete tally of the financial losses from the wildfires will be possible.
‘We’re in the very early stages of this disaster,’ Porter added.
