The deadly wildfires come amid an ongoing insurance crisis in the state. For some residents, rebuilding will be a challenge.
Deadly wildfires continue to engulf the Los Angeles area—already called the city’s most destructive series of fires ever and likely the costliest. Neighborhoods have been turned to ash, with an estimated 2,000 homes and businesses reportedly destroyed since the fires first broke out on Tuesday. Officials warned on Thursday that the worst may still be to come.
More than 100,000 residents are under mandatory evacuation orders. Six fires continue to blaze on, mostly uncontained, as powerful winds on Wednesday caused flames to spread quickly, catching many residents off guard.
“Our hearts, thoughts and prayers are with those impacted by the fires and those currently attempting to evacuate,” the Greater Los Angeles REALTORS® posted at its site on Thursday. “The scale of the devastation from the wildfires is breathtaking and difficult to comprehend, and the association stands ready to help in any way we can.”
The fires have already consumed about 27,000 acres—the equivalent of the entire city of San Francisco, the Associated Press reports. The fires are striking heavily populated and affluent areas, including on Wednesday evening, reaching the Hollywood Hills and threatening some iconic LA landmarks.
“The fires in Southern California are devastating residents and businesses directly while also impacting surrounding communities with dangerous smoke levels and utility power shutoffs,” says Natalie Ambrosio Preudhomme, associate director of commercial real estate research at Moody’s.
Insurance Crisis Could Pose Obstacles in Rebuilding
Rising wildfire risks in California have been raising homeowners insurance costs and have resulted in some major insurance companies no longer issuing new policies in the state. Residents over the past year have found maintaining coverage in areas deemed at risk for wildfires increasingly difficult.
Actor James Woods recently shared on X how his family was forced to flee their newly renovated home in Palisades on Tuesday as flames closed in. “One of the major insurance companies canceled all the policies in our neighborhood about four months ago,” he wrote on X.
The California Department of Insurance adopted a new regulation just last month that requires insurance carriers who had stopped providing coverage in California to begin issuing policies once again. Insurance companies are permitted to pass along at least some of the cost of reinsurance to consumers. It’s unclear whether residents who’d been dropped by their insurance carriers could obtain coverage since the new regulation took effect.
"Californians deserve a reliable insurance market that doesn't retreat from communities most vulnerable to wildfires and climate change," Insurance Commissioner Ricardo Lara said in a statement posted on Dec. 30, 2024, announcing the new regulation.
Amy Bach, the executive director of United Policyholders, a California-based nonprofit consumer group, told NBC News that homeowners in California may be on the hook to pay up to $40,000 a year to insure their properties. Bach expressed concern about how much insurance companies will pay claimants and how long it will take for homeowners to get the payments. “For the people who lose their homes in these wildfires, there will be fights over coverage,” she told NBC News.
Analysts from J.P. Morgan estimated on Thursday that insured losses from the California wildfires could exceed $20 billion, potentially making it the most expensive wildfire outbreak ever for the insurance and reinsurance market. Contributing to those totals, the Palisades Fire ravaged affluent residential areas, where the median home price exceeds $3 million.
"These events will continue to have widespread, negative impacts for the state’s broader insurance market ... will likely drive up premiums and may reduce property insurance availability,” warned Denise Rappmund, vice president and senior analyst at Moody’s Ratings.
The National Association of REALTORS® is monitoring the situation closely, says NAR Senior Policy Representative Austin Perez. The worries are real, he says, but the good news is that California's insurance rates remain the most affordable relative to income across the country, and only about 3% of California's insurance market is impacted. Perez says the state's strict insurance rate controls and land-use policies may be exacerbating the issues California residents face.
On a national level, he says, insurance rates are starting to level off and come down as more reinsurers come back to the U.S.
The California Association of REALTORS® has made several downloadable consumer “one-sheets” available on how to find fire insurance, protect yourself from scam artists following wildfire damage and better protect homes against wildfires.
Source: nar.realtor
