The Cost of Wildfires: How Insurance Companies Are Paying Billions 

Wildfires in California have caused significant damage, and with time, these wildfires are becoming more and more destructive. The cost of rebuilding such a loss is soaring, where Insurance companies have paid over $6.9 billion for claims in the affected areas of the Los Angeles wildfires. This number is expected to rise further.  

Key Facts:  

• Approximately 33,000 claims have been filed for home, business, and living expenses.  
• About 5,600 auto insurance claims – with a total of $73 million in losses. 
• Economic damage is expected to reach over $164 billion, and the total losses for insurers could reach up to $40 billion.  

Renowned insurance companies have reported over $1 billion in losses associated with the wildfires. The California FAIR Plan, known for helping homeowners who could not get insurance from elsewhere, has also paid out approximately $914 million, and the loss is so extensive that higher amounts would be required to keep up with the expenses.  

As a result, policyholders in fire-prone areas, whether homeowners or businesses are likely to face a massive increase in premiums, rigid underwriting requirements, or no insurance. Residents are unable to find affordable coverage because the majority of insurers in the California Insurance market are pulling back from high-risk zones. This is because urban expansion in a fire-prone area leads to massive losses when facing such a catastrophe, and a majority of homes and businesses remain underinsured – leading to out-of-pocket expenses and reliance on the state. Furthermore, reinsurance and subrogation challenges cause further difficulty for insurers to recover from losses with the increasing billion-dollar losses in the industry. And so, most carriers have decided to pull away from the industry.  

Wildfires are no longer just an environmental crisis, but a financial disaster as well. It is crucial for the insurance industry and the government to find solutions because at the current moment, both the insureds and the insurers are in a precarious position. Perhaps better strategies to prevent wildfires and introducing new types of coverage would help survive wildfires better. For now, all homeowners in wildfire-prone areas should ensure they have adequate protection.  

For expert advice, contact Shayne Bevilacqua at Professional Liability Insurance Group.  
Call or Text us at +1 (877) PLIG – 123, That’s (877) 754 – 4123.