Los Angeles Wildfire Crisis
CoreLogic pegs LA wildfire insured loss at $35bn to $45bn - Reinsurance News
Catastrophe risk modeller CoreLogic has estimated that residential and commercial insurance industry losses for the ongoing Eaton and Palisades Fires in Los Angeles, California, will fall between $35 billion and $45 billion.
With the fires in Eaton and Palisades still burning as of Thursday afternoon, CoreLogic’s estimated insured loss range is preliminary.
The risk modeller confirms that it will provide a final insured loss estimate for the wildfires once the blazes have been fully contained, which is proving a challenge in very dry and windy conditions.
CoreLogic’s estimate is just for residential and commercial insured losses for the Eaton and Palisades events, so doesn’t include any damages from the other, smaller fires that have occurred since the outbreak on January 7th, 2025, although the large majority of the loss is expected to come from the Eaton and Palisades outbreaks.
LA wildfire insured losses estimated between $20–$30bn: Gallagher Re
Gallagher Re has revised its insured loss estimates for the Southern California wildfires to a range of $20 billion to $30 billion, with the portion anticipated to be ceded to reinsurance potentially reaching the mid-to-high single-digit billions.
Although the Palisades and Eaton wildfires in Los Angeles are now expected to rank among the costliest individually identified fires ever recorded for the insurance industry, Gallagher Re noted that it should remain manageable for reinsurers.
It is worth noting that this total estimate, which is based exclusively on the Palisades Fire and Eaton Fire, includes expected losses incurred from the private insurance market and California’s FAIR Plan.
For uninsured fire victims, the Small Business Administration offers a rare lifeline
As wildfires continue to burn around Southern California, thousands of business owners, homeowners and renters are confronting the daunting challenge of rebuilding from the ashes. For some number of them, the road ahead will be all the more difficult because they didn’t have any or enough insurance to cover their losses. For them, the U.S. Small Business Administration is a possible lifeline.
The SBA, which offers emergency loans to businesses, homeowners, renters and nonprofits, is among the few relief options for those who don’t have insurance or are underinsured. Uninsured Angelenos can also apply for disaster assistance through the Federal Emergency Management Agency, or FEMA.
The current wildfires are ravaging a state that was already in the midst of a home insurance crisis. Thousands of homeowners have lost their insurance in recent years as providers pull out of fire-prone areas and jack up their prices in the face of rising risk.
“For those who are not going to get that insurance payout, this is available,” Small Business Administration head Isabella Casillas Guzman said in an interview during a recent trip to the fire areas. “The loans are intended to fill gaps, and that is very broad.”
About one-third of businesses don’t have insurance and three-quarters are underinsured, Guzman said.
Consumer Watchdog: Wildfire and Windstorm Alert for Los Angeles County and Surrounding Areas
In the wake of the recent wildfires and windstorms affecting Los Angeles County and surrounding areas, Consumer Watchdog is calling on homeowners and renters to familiarize themselves with their rights to assist in their recovery.
If your home has been destroyed or damaged by the recent events in Los Angeles County and nearby areas, it's essential to know your available resources. Consumer Watchdog is dedicated to helping residents navigate the recovery process, protecting their rights, and ensuring they receive the assistance they deserve.
To help guide you through the recovery process and ensure you're receiving the full benefits you're entitled to, here are some important tips for managing insurance claims and protecting your property.
Climate Change/Exposure
The Mounting Cost of Climate for Insurers
Climate-related disasters are leading to increased claims across the insurance industry. As floods, heat waves, fires, and extreme weather becomes more common, insurers are re-evaluating their exposure.
U.S. Department of the Treasury Report: Homeowners Insurance Costs Rising, Availability Declining as Climate-Related Events Take Their Toll
The U.S. Department of the Treasury’s Federal Insurance Office (FIO) today released the most comprehensive data on homeowners insurance in history, along with a major report showing that homeowners insurance is becoming more costly and harder to procure for millions of Americans as the costs of climate-related events pose growing challenges to insurers and their customers alike.
The report is based on the most comprehensive and granular snapshot of the homeowners insurance market to date, covering over 330 insurers on more than 246 million homeowners insurance policies aggregated to the ZIP Code level from 2018 to 2022 (an annual average of 49.3 million policies). The data was collected through a first-of-its-kind effort by the National Association of Insurance Commissioners, state insurance regulators, and FIO.
Among the report’s key findings:
Homeowners insurance costs are rising fast across the nation, although with significant variation by region and ZIP Codes. Average homeowners insurance premiums per policy increased 8.7 percent faster than the rate of inflation in 2018-2022
Homeowners in communities affected by substantial weather events are paying far more than those elsewhere.
Policy nonrenewal rates also are higher in areas with the highest expected losses from climate-related perils.
FEMA Maps Lead to Development in Flood-Risk Areas, University Study Shows
A study by researchers at North Carolina State University supports what some critics of federal flood maps have said for years: That lines drawn on a map give a false sense of security from flooding and have led to increased development in vulnerable areas.
The “safe development paradox” has meant that very near the edge of the 100-year flood zone, or the Federal Emergency Management Agency’s special flood hazard area, development has boomed, increasing the risk of insured and uninsured losses.
Commentary/Opinion
California Wildfire Challenges May Test US Public Finance Resilience
The financial resilience of U.S. Public Finance issuers will support their credit quality in the near term amid the devastation of the wildfires in the greater Los Angeles area, Fitch Ratings says. The fires have destroyed heavily populated residential areas, requiring contamination remediation and rebuilding, and they are likely to become one of the most expensive natural disasters in U.S. history. Issuers may ultimately face increased costs and revenue base erosion, but it is too early to determine the extent of potential credit pressures.
The state and affected local governments, as well as municipal utilities and nonprofit entities, have significant financial flexibility to manage increased costs while awaiting Federal Emergency Management Agency reimbursement. As in past natural disasters, FEMA support will be crucial to maintaining fiscal stability.
Municipalities will experience a dip in tax revenues due to state law, which allows for the immediate reduction of property tax assessments to only the land value following a natural disaster. Furthermore, affected taxpayers may defer property tax payments otherwise due in April 2025. The revenue decrease would be moderate relative to the city of LA’s vast tax base but still exacerbate forecasted deficits. The state will also face some revenue forecasting and collection uncertainty given the state income tax filing extension recently granted to LA County taxpayers.
Financial Results
Commercial underwriting results likely worsened in 2024: Report
U.S. commercial insurers are projected to see a deterioration in underwriting results for 2024, which was marked by losses from Hurricane Milton and rising general liability losses.
The net combined ratio for commercial property is expected to worsen by 3.3 points to 91.2% when insurers publish their full-year results, according to a report released Thursday by the Insurance Information Institute and Milliman Inc. Travelers Cos. Inc., the bellwether among commercial insurers, will report its 2024 results next week.
Hurricane Milton, which struck Florida’s Gulf Coast as a Category 3 hurricane in October, was the worst catastrophe for commercial insurers since Hurricane Ian in 2022, the report said. According to a recent report by Munich Reinsurance Co., the storm caused $25 billion in insured losses.
The combined ratio for general liability business is expected to deteriorate 3.6 points to 103.7%, the III/Milliman report said. In recent years, liability insurers have raised concerns over so-called social inflation, or rising court awards and settlements.
InsurTech/M&A/Finance💰/Collaboration
Small business insurance provider Rainbow lands $8m Series A investment
The latest round of financing increases Rainbow's total capital to $20m since its inception in 2022.Specialist managing general underwriter (MGU) Rainbow, focused on small business insurance, has secured $8m in Series A funding, led by Zigg Capital.
The fresh infusion increases US-based Rainbow's total capital to $20m and will expedite its expansion into new business segments.
Rainbow co-founder and CEO Bobby Touran said: “As we continue to prove our thesis for scalable, software-driven-underwriting across a growing portfolio of specialised insurance programmes, we are thrilled to be deepening our partnership with Zigg, a firm that shares our vision for a differentiated approach to profitable insurance underwriting with endless potential.
AI in Insurance
AI Can Enhance Medical Billing Accuracy | Insurance Thought Leadership
Despite advances in technology, medical billing errors remain alarmingly prevalent.
75% of medical bills contain coding errors, creating a ripple effect of financial inefficiencies and regulatory risks. The impact extends beyond providers and insurers: 45% of consumers encountered faulty bills last year, and many chose not to dispute them, overwhelmed by opaque rules and coverage exclusions.
This decay of trust signals an urgent need for change. Artificial intelligence and human-in-the-loop machine learning (HITL/ML) offer a path forward. By streamlining claims processing and reducing errors, these technologies can enhance accuracy and compliance, restoring transparency and confidence in the healthcare system for all stakeholders — from patients to policymakers.
Medical billing errors burden healthcare providers and insurers with significant financial challenges, exacerbating inefficiencies across the system. Hospitals and health systems spent $19.7 billion attempting to overturn denied claims, reflecting the immense cost of addressing billing inaccuracies.
These errors disproportionately affect higher-cost treatments, with the average denied claim tied to charges around $14,000 or more. Additionally, 15% of claims submitted to private payers are denied, including many with prior authorization. For providers, each denial represents not only lost revenue but also the added expense of multiple rounds of appeals; more than half of denied claims are eventually overturned.
John T. Bright is the founder and CEO of Med Claims Compliance Corporation (MCC)
Events
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