Insurers Lose Billions From California Wildfires, Homeowners Left in Limbo About Rebuilding

A State Farm insurance company sign sits amid the rubble of a building destroyed by the Palisades Fire on Sunset Boulevard in the Pacific Palisades neighborhood of Los Angeles, Calif., on Jan. 16, 2025. Frederic Brown/AFP via Getty Images

Insurance providers Allstate, State Farm, and Chubb Insurance have claimed billions of dollars worth of losses as a result of wildfires that ravaged the Los Angeles region for most of January.

Allstate says losses related to January California wildfires will be approximately $1.1 billion, pre-tax, net of reinsurance. The insurer, which is based in Illinois, implied the losses would be worse were it not for a decision to reduce market share beginning in 2007.

On Feb. 3, State Farm General asked the California Department of Insurance to approve interim rate increases, including 22 percent average for homeowners, to avert a dire situation for California policy holders.

As of Feb. 1, State Farm General had received more than 8,700 fire claims. The Illinois-based company has paid more than $1 billion to customers and is expected to pay out more.

“Insurance will cost more for customers in California going forward because the risk is greater in California,” the company said in a statement.

“We look forward to working alongside regulators, policymakers and industry leaders on creating a sustainable insurance environment in California – one that balances risk and increased rates, ensures long-term market stability and availability and allows insurers like State Farm General to remain a vital part of California’s future,” wrote the insurance company.

Last year, the rating agency Am Best downgraded State Farm General’s financial strength rating due to its capital position. The fires could lead to further downgrades due to the additional capital drawdown.

Chubb Limited chairman and CEO Evan Greenberg revealed that the New Jersey-based insurance company would lose $1.5 billion net pre-tax and is a first quarter 2025 event.

State Farm and Allstate stopped offering new policies in California in 2023. State Farm announced it would no longer accept applications for business and personal property and casualty insurance.

“We take seriously our responsibility to manage risk,” State Farm said at the time. “It’s necessary to take these actions now to improve the company’s financial strength.”

Allstate paused in November 2022 new homeowners, condo, and commercial insurance policies in California.

“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes and higher reinsurance premiums,” the company said in a statement at the time.

Residents Concerned Over Insurance

On Feb. 4, the Pacific Palisades Community Council met for two hours to discuss the next steps for rebuilding the Palisades.

Los Angeles City Councilmember Traci Park, whose district encompasses the fire-ravaged Pacific Palisades, said that over the summer 1,600 people in Palisades had their insurance coverage dropped by State Farm alone.

Park says she has spoken to Department of Insurance Commissioner Ricardo Lara about concerns over insurance. She says residents are being told by their insurance companies they need to return to their houses immediately, in the cases where the houses are still standing, despite concerns over safety and health risks.

There’s also concern as to whether or not homeowners will be able to obtain insurance after rebuilding.

“People would like to know why they would rebuild millions of dollars of homes if they can’t be insured,” said Maryam Zar, former chair of the Pacific Palisades Community Council. “And I think a lot of these questions have to do with whether or not the insurance companies will give us guidance on how to build in order for them to insure us on the other end.”

Chief Recovery Officer Steve Soboroff, who served as police commissioner from 2013–2023, noted the insurance companies have already attempted to pull out from problem areas, and some tried to pull out of California altogether.

“I don’t think you can guarantee a long term insurance policy, but I think you can communicate with your insurance company, and have someone negotiate with your insurance company how much you’re going to get,” he said, suggesting people consult with insurance companies about what they need to do in the rebuilding process to qualify for coverage.

“What are the kinds of things you can do to build back stronger so you are more insurable?” Either way, he doesn’t believe anyone can guarantee homeowners insurance will be available once the Palisades is rebuilt.

In mid-January, while the fires were still burning, CoreLogic estimated preliminary residential and commercial loss estimates for the Eaton and Palisades Fires to be between $35 to $45 billion. At the time of the estimate, both fires were less than 50 percent contained.