Updated third para with latest area burned figures
By Scott Vincent, Edward Carron
Jan 8 - (The Insurer) - This week’s wildfire outbreak in Los Angeles highlights why industry concern around the damage potential of wildfires has been escalating in recent years amid an increased frequency and scale of loss events.
The California Department of Forestry and Fire Protection (Cal Fire) is currently monitoring five active events all of which ignited over Tuesday and Wednesday.
The Palisades Fire and Eaton Fire are the two largest, having burned more than 5,000 and 2,000 acres respectively. LA county fire chief Anthony Marrone said around 1,000 structures have been destroyed by the Palisades Fire, with at least 100 destroyed by the Eaton Fire.
This week’s outbreak caught many by surprise, given that wildfire season has traditionally been viewed as running from May to November.
However, the National Weather Service warned on Monday of a widespread windstorm across the region which has caused the fires to spread so rapidly.
Extremely powerful Santa Ana winds alongside low humidity and dry vegetation combined to fuel yesterday's fire outbreak, with officials warning conditions were “about as bad as it gets in terms of fire weather”.
The wildfires currently raging through southern California have been described as “unprecedented” by state governor Gavin Newsom, with tens of thousands of people evacuated.
The largest is in the Pacific Palisades neighbourhood, an affluent area of the city which is home to many celebrities and high net worth individuals.
The neighbourhood has a median house price of $2.8mn, according to Zillow. There are multiple homes on the property site with a listed value in surplus of $10mn that are within the burn area, as reported by Cal Fire.
Increasing development in the wildland-urban interface – the area where human development meets wildland vegetation – coupled with shifting weather patterns has meant wildfires in California have trended upwards in frequency and scale, with 15 of the largest 20 hitting in the last 10 years.
The fires are affecting more urban areas with seven of the 10 most destructive occurring in the last decade.
California’s most destructive wildfire on record was 2018’s Camp Fire, which destroyed 18.804 properties, based on California Department of Forestry and Fire Protection data. This is more than three times the total recorded for the next most destructive event, 2017’s Tubbs Fire.
The increase in destructive fires has also correlated with a rise in insured losses. According to Insurance Information Institute data sourced from Aon, nine of the 10 costliest US wildfire events for the industry have occurred within the past decade.
Insurers have increasingly withdrawn from high risk areas. For example, in April 2024 State Farm announced that 72,000 property insurance policies in the state would not be renewed due to wildfire risks, 30,000 of which were covering homes, with 1,626 in the Pacific Palisades zip code.
Allstate, AIG and Chubb have also reduced their appetite for writing California homeowners insurance on the back of escalating losses within the state and a challenging regulatory environment that limits insurer capacity to implement rate increases.
To fill the gap California’s FAIR Plan serves as the state’s insurer of last resort, providing coverage of up to $30mn for commercial properties and $3mn for residential.
The FAIR Plan's assumed exposure grew by 61 percent to $458bn in the 2024 fiscal year amid the reduction in appetite from private insurers.
Comments