• by Tanya Gazdik , January 8, 2025

The videos and photos of burning land and buildings north of Los Angeles are horrific.

But the long-term ramifications of a state seemingly facing never-ending natural disasters will go on long after the fires are extinguished.

“The fires struck just as California officials have been working to stop insurance companies from fleeing their state,” according to The New York Times. “That exodus, driven by rising losses from wildfires that have grown larger and more frequent, could accelerate because of this week’s fires, experts said.”

This isn’t just a California problem. Residents in other states are underinsured for fires, floods, hurricanes and other disasters that are becoming more frequent or intense or both as the planet warms. 

“There may be more than $1 trillion in hidden home-value losses from floods and fires alone, posing the threat of a mini financial crisis,” notes Bloomberg. “Florida and many other states have their own insurance crises, which they have managed to varying degrees of failure. Many homeowners in these places are turning not only to state insurers but lightly regulated insurers, taking on even more risk for themselves and ultimately taxpayers.”

State Farm canceled hundreds of homeowners' policies last summer in Pacific Palisades, the same area now being ravaged by a devastating wildfire.

“The move was justified by the company as an attempt to avoid ‘financial failure’ as the frequency and severity of wildfires is growing in the Golden State, especially in at-risk zones,” according to Newsweek. “But as the multiple fires currently burning through Southern California threaten to cause devastating losses for residents, many will likely need to rely on their insurers to get back on their feet after the blazes are contained.”

State legislation for expanding insurance access across the state may have come too late.

“Just before the New Year, the California Department of Insurance announced it had reached the final step in passing the ‘Sustainable Insurance Strategy,’ which would require insurance companies to increase coverage in high-risk, wildfire-distressed areas, and limit costs passed onto customers,” according to Fox Business. “But due to a 30-day review period, the legislation did not go into effect by the time five wildfires — the Hurst, Eaton, Woodley, Palisades and Tyler Fires — started burning on Tuesday in Los Angeles County, including the Pacific Palisades and Sylmar neighborhoods of Los Angeles and another near the City of Pasadena.”

Investors were keeping an eye on insurance stocks Wednesday.

“Wildfire risk has been a key driver in the state's challenge to maintain affordable homeowner's insurance coverage,” according to Investor’s Business Daily. “Based on a preliminary assessment of the affected area and historical events, insured losses from this fire could approach $10 billion, with primary carriers being more exposed than reinsurers, the note said.”