Los Angeles wildfires trigger new wave of insurance challenges across California

In California, it’s not a question of will another wildfire break out, it’s a question of when.

Furthermore, the narrative for business and homeowners has also changed greatly due to the distinct probability of wildfires occurring closer to well-populated areas almost on a yearly basis now.

In 2025, Californians are once again faced with widespread destruction as the LA-area wildfires blaze across the region. In the first quarter of 2025, more than 57,000 acres have burned in Southern California. The Palisades Fire alone destroyed 6,837 structures, making it one of the most destructive fires in California’s history.

The insured losses from the 2025 LA-area fires are estimated to be some of the most costly of all time. With more than $250 billion in damages, this year is on track to become one of the costliest wildfire seasons in state history. As major insurers pull back from high-risk regions, California’s property insurance market is entering a period of instability. This leaves many businesses and homeowners struggling to find affordable coverage.

The new reality for wildfires in California

In the past few decades, Southern California has become hotter and drier, making it more and more prone to devastating forest fires. This increased risk, as well as forests encroaching on more densely populated areas, spells out disaster for residents, municipalities, and insurers. Each year, the wildfire risks are higher, and the threat of a catastrophic earthquake, like those in 2018, 2020, and 2025, increases.

Recent estimates show that the LA fires alone will likely result in $20 to $45 billion in insurance losses. This has caused insurance companies operating in California to stop coverage in high-risk areas or raise premiums significantly.

In response, enrollment in the state’s last-resort FAIR Plan has surged, and some commercial policyholders are being left with limited or no viable coverage options. As wildfires grow more destructive and frequent, the state’s property insurance infrastructure is straining to keep up.

Insurance fallout in 2025

The mounting frequency and severity of wildfires have placed immense pressure on California’s insurance industry.

Following the 2025 LA wildfires, many insurers are once again re-evaluating their exposure in high-risk regions. This comes on the heels of several devastating fire seasons over the past decade, such as the 2017 Tubbs Fire, 2018 Camp and Woolsey Fires, and the massive 2021 Dixie Fire. Each of these incidents contributed to a rising number of insurance claims and a volatile property insurance market.

Here are some of the ways insurers have responded to the increase in fire risk:

• Premiums have surged, with some insurers like State Farm requesting a 22% increase in rates.
• A growing number of carriers are not renewing policies in wildfire-prone areas or exiting the state altogether.
• Businesses are facing coverage limitations such as higher deductibles or the need to piece together coverage through multiple carriers or surplus lines markets.

Lessons from the past

Over the past decade, wildfires in California have wreaked havoc on communities across the state while simultaneously reshaping the insurance market. Each major event has left behind a trail of physical destruction and long-term financial and regulatory consequences for homeowners, business owners, and insurers.

Here are some key takeaways and effects from major wildfires in California:

2018 Camp Fire

• The deadliest and most destructive wildfire in state history (19,000+ structures lost).
• Led to over $16.5 billion in damages.
• This wildfire led to the insolvency of the insurer Merced Property & Casualty.
• Triggered major policy reviews and underwriting restrictions across the insurance industry.

2020 Wildfire Season

• The largest wildfire season on record in California, with over 4.3 million acres burned statewide.
• Insurers began requiring detailed fire mitigation documentation for renewals.
• Widespread business shutdowns due to evacuations and smoke damage exposed gaps in interruption coverage, especially when no physical damage occurred.

In 2021, California business owners and homeowners in high-risk areas saw a record number of non-renewal notices, with 1,037,767. Due to these catastrophic fires, major carriers (e.g., State Farm, Allstate) began pulling back coverage in California.

Moving forward: What California business owners can do

Navigating the modern risks that California wildfires pose takes proactive risk management and forward thinking. Here are some of our top recommendations for adapting and protecting your business in this new era of wildfire risk.

You should review your commercial property and business interruption coverage annually to make sure it reflects your current operations and risk profile. 

Additionally, since many policies in California exclude coverage for fire damage, it’s important to implement fire mitigation measures. Invest in fire-resistant materials to slow the spread of fire on your property and manage flammable vegetation in your area.

Wildfires are an inevitability in California, and gaining insurance coverage has become more and more difficult for businesses in recent years. But there are still ways to protect your business.

Looking to obtain sufficient insurance coverage for your California business? Get a quote with Embroker today.