Willis and The Nature Conservancy structured a $2.5 mn wildfire insurance policy in California, incorporating risk reduction efforts.
The policy was placed with Globe Underwriting for the Tahoe Donner Association, which manages over 7,300 acres and 6,473 properties in the Sierra Nevada Mountains.
Tahoe Donner was selected due to its Forest Health Management Program, which began in 1992. The program focuses on reducing wildfire risk through actions like tree thinning and controlled burns.
These measures aim to limit flammable vegetation and improve forest conditions. The Center for Law, Energy and the Environment at the University of California, Berkeley, participated in the policy development.
David Williams, associate director of alternative risk transfer solutions at Willis, said these forest treatments lowered both the premium and deductible significantly.
The final policy, covering 1,345 acres of forest and recreation land, reflects a 39% reduction in premium and 89% reduction in deductible compared to a standard policy without fire risk mitigation.
TNC stated the goal was to show that insurance can become more available and cost-effective when forest management practices are applied.
Prior insurance placements in similar areas did not consider ecological mitigation when pricing wildfire coverage.
Separately, State Farm reported rising claims linked to the January wildfires in Los Angeles. As of March 27, 2025, the company had paid $2.45 bn on 12,200 claims.
State Farm insures 250,000 homes and 880,000 vehicles in Los Angeles County and has deployed its catastrophe response teams across the region.
The LA wildfire that began on January 7 caused expected direct losses of $7.6 bn. State Farm said it may retain about $212 mn in post-reinsurance losses.
In response, California Insurance Commissioner Ricardo Lara approved State Farm General’s interim property rate increases of 21.8% to 38%, under certain conditions. Lara demanded the insurer pause all nonrenewals and cancellations through year-end. He also urged the parent company to inject $500mn into the subsidiary.
Wildfires raging through Los Angeles may lead to significant changes in California’s insurance industry, said Daniel Aldrich, co-director of Northeastern University’s Global Resilience Institute. He compared the situation to Hurricane Katrina nearly 20 years ago, predicting insolvencies and further exits from the property insurance market.
California FAIR Plan, the state’s insurer of last resort, faces increased pressure due to concentrated exposures in fire-hit neighborhoods.
For instance, the FAIR Plan had $5.89 bn in exposure in Pacific Palisades, one of the hardest-hit areas. Statewide exposure surged 61.3% year-over-year to $458 bn as of September 2024.
Dwelling policies rose 123% over the past four years, reaching 248,902, according to FAIR’s report. Last year, FAIR Plan President Victoria Roach stated that the plan’s $336 bn in property exposure was backed by just $200 mn in capital and $700 mn in cash.
J.P. Morgan estimated insured losses from the fires could surpass $20 bn as of early 2025. Aldrich warned that even with $2.5 bn in reinsurance, private insurers could face assessments that drive up property insurance premiums by hundreds of dollars. These increases would compound recent and pending rate hikes driven by wildfire risks and inflation.
