MDD LA Wildfires Report
24 March, 2025-
Daniel Brown -
USA
California Wildfires of January 2025: A Devastating Start to the Year
The year 2025 began with a series of devastating wildfires that swept through Southern California, leaving a trail of destruction and significant insured losses in their wake. Fuelled by dry conditions and strong Santa Ana winds, the fires erupted on January 7th, 2025, and continued to burn for several weeks, impacting areas in Los Angeles County and beyond.
Major Fires and Affected Locations
Palisades Fire
This fire ignited near the Pacific Palisades neighbourhood of Los Angeles and quickly spread, forcing evacuations in areas including Malibu, Brentwood, and parts of the San Fernando Valley. The Palisades Fire destroyed over 5,300 structures and consumed almost 23,713 acres of land. The image below features a snapshot of McKenzie Intelligence Services (MIS) building level damage assessments for areas impacted by the Palisades Fire, overlaid on Maxar Intelligence satellite imagery. Red buildings have been assessed by the MIS team as being destroyed, and yellow buildings signify that there is a risk of internal damage from smoke.
Eaton Fire
Burning in the Eaton Canyon area near Altadena, this fire also grew rapidly, impacting communities in the foothills of the San Gabriel Mountains. The Eaton Fire burned around 14,117 acres of land, resulting in over 7,000 structures across the Altadena area being destroyed or damaged. The image below features a snapshot of McKenzie Intelligence Services building level damage assessments for areas impacted by the Eaton Fire, overlaid on Maxar satellite imagery. Red buildings have been assessed by the MIS team as being destroyed and yellow buildings signify that there is a risk of internal damage from smoke.
In total, MIS assessed the impact of the LA wildfires on 57,000 individual buildings, delivered just 7 days after the wildfires first began to spread. Out of the 57,000 assessed, the MIS Intelligence team identified that 12,355 buildings were destroyed, and a further 17,500 buildings were at risk of internal damage from smoke.
Insured Losses and Industry Impact
The January 2025 wildfires resulted in substantial insured losses, with Travelers estimating pre-tax catastrophe losses of $1.7 billion, impacting both personal and commercial insurance segments. This figure marks the largest Q1 insurance loss on record, highlighting the severity of the event. The fires are expected to have a significant impact on the insurance market, potentially leading to increased premiums and stricter underwriting guidelines in wildfire-prone areas.
Short-Tail and Long-Tail Aspects
- Short-Tail: The majority of losses from the wildfires are expected to be short-tail, meaning claims will be filed and settled relatively quickly. These claims typically involve property damage, such as homes and businesses destroyed or damaged by fire and smoke.
- Long-Tail: While the majority of claims will be short-tail, there are also long-tail aspects to consider. These include potential claims related to:
- Business Interruption: Businesses forced to close due to the fires may file claims for lost income.
- Additional Living Expenses: Homeowners displaced by the fires may incur significant additional living expenses, such as temporary housing and meals.
- Environmental Damage: The fires may have caused environmental damage, leading to potential claims for remediation and restoration.
Conclusion
The January 2025 California wildfires serve as a stark reminder of the increasing risk of wildfires in the region and the potential for significant insured losses. The event is expected to have a lasting impact on the insurance market, highlighting the need for continued efforts to mitigate wildfire risk and ensure adequate insurance coverage for homeowners and businesses in vulnerable areas.
Written by Dan Brown, with source information from McKenzie Intelligence and Maxar Technologies.
The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.
Daniel Brown
Director - Global Catastrophes & London Client Development
- +44 203 384 5499
- dbrown@mdd.com
- London, EMEA
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