Year-over-year, California FAIR Plan policies in Pacific Palisades (ZIP code 90272) increased by 85% to 1,430. This area has suffered significant damage from one of the wildfires burning in Los Angeles.
The California FAIR Plan, the state’s insurer of last resort, held $377 mn last week to pay claims, according to the California Department of Insurance (CDI).
Additionally, the FAIR Plan has a reinsurance tower. Claims exceeding these resources could lead to a special assessment on private property insurers operating in the state.
The FAIR Plan stated it is too early to estimate losses. “Claims vary depending on coverage type and amount. Operating on a cash-in, cash-out basis, our financial situation evolves daily,” the statement noted. “We continuously monitor our financial position and may tap into available payment mechanisms to ensure all claims are covered. The situation remains fluid.”
Aerial imagery from the California Department of Forestry and Fire Protection suggests the Palisades Fire may have damaged or destroyed about 5,000 structures as of Jan. 15, eight days after the wildfire started. Officials confirmed the destruction of 2,101 structures and damage to nearly 400 more. The fire is 19% contained and threatens 12,250 structures.
The FAIR Plan reported in September that it wrote 360 residential policies in ZIP code 90272 four years ago. By 2023, the number had risen to 773, before jumping to 1,430 in 2024.
Statewide, the FAIR Plan saw residential policies increase by 49,823 in 2023, reaching 324,954—a growth of 18% year-over-year. Its share of residential policies rose to 3.7%, up 0.6%.
The Palisades Fire is currently ranked as the fourth-most destructive wildfire in California, with estimated losses exceeding 5,000 structures, according to Cal Fire. The state’s most destructive fire remains the 2018 Camp Fire, which razed over 18,800 structures, including much of Paradise.
Insurers paid $11.8 bn (2022 dollars) for Camp Fire losses. Losses from the Palisades Fire are expected to surpass this, with Aon estimating insured damages between $15 bn and $20 bn.
The Eaton Fire, burning in Los Angeles, has destroyed over 7,000 structures, primarily in the Altadena area, and affected neighboring Pasadena. Cal Fire now ranks it as the second-most destructive wildfire in the state. Aon estimates insured losses between $7 bn and $10 bn from Eaton.
The Los Angeles wildfires are expected to be a major catastrophic event for the insurance industry
However, analysts indicate that the insurance and reinsurance sector remains well-capitalized to manage losses, though some insurers may face greater challenges than others.
The longer-term impact on California’s insurance market from the Los Angeles County wildfires may be substantial, as insurers will further re-examine their appetites for wildfire risk as it has become highly unpredictable concerning location, intensity and seasonality.
The wildfires in the Los Angeles area have caused unprecedented property damage, with insured losses potentially surpassing $40 bn, leading to a negative but manageable impact on insurers’ credit profiles. As for the total loss economic loss estimated to between $135 bn and $150 bn.
As of January 23, 30 deaths were attributed to the wildfires. Of those, 20 were attributed to the Eaton Fire and 10 to the Palisades Fire. These figures represent the 5th and 14th deadliest fires in the history of California, respectively.