As flames tore through Los Angeles neighborhoods this fall, the devastation quickly escalated from tragedy to history-making catastrophe. With more than $135 to $150 billion in estimated losses and tens of thousands displaced, experts now warn that this disaster could reshape California's insurance landscape for decades.
Insurance veteran Karl Susman, appearing on CBS's On Your Side, described the event as "unlike anything I've ever experienced in over three decades of doing this." His agency alone has already logged over 60 total home losses, compared to just a handful in previous wildfire years.
"This isn't just another fire season," Susman emphasized. "It's an entirely new chapter in how we understand, price, and manage risk in California."
According to early figures from the National Weather Service, the economic impact of the Los Angeles fires may reach $150 billion or more, making it one of the costliest natural disasters in U.S. history.
That total includes not just direct property losses but also ripple effects on local economies, infrastructure, and — crucially — the insurance industry itself.
Insurance claims are already pouring in from burned-out neighborhoods in Pacific Palisades, Altadena, Woodland Hills, and Malibu. Many residents remain evacuated, uncertain whether their homes survived.
"Most people don't even know the situation with their home yet," Susman noted. "They're hoping for the best, but they're still evacuated — so the number of claims we've seen is just the tip of the iceberg."
In the days following the fire's escalation, California Insurance Commissioner Ricardo Lara issued an emergency moratorium prohibiting insurers from canceling or non-renewing homeowners policies in affected ZIP codes — as well as in the areas surrounding the burn zones.
The goal: to prevent a repeat of the insurance exodus that followed previous fires in Paradise, Santa Rosa, and Napa.
"If you're in one of the affected ZIP codes," Susman explained, "you cannot be non-renewed right now. Even if your policy was canceled for non-payment, the insurer is supposed to reinstate it if you reach out and request it."
However, the key word is request. Homeowners must take action to ensure their policies are reinstated.
"They're not going to automatically just keep policies in force if they've lapsed," he warned. "You have to ask them to do it."
For those impacted, contacting both the carrier and their agent is critical — especially if a payment was missed during the evacuation period.
Fortunately, California's Sustainable Insurance Strategy, enacted in late 2024, was already in place before the fires struck. This sweeping reform — championed by Commissioner Lara — is designed to modernize the state's insurance system by giving carriers new tools to manage and price wildfire risk responsibly.
Under these rules, insurers can now:
Use catastrophe modeling to predict wildfire risk more accurately.
Incorporate reinsurance costs (the insurance carriers buy for themselves) into rate filings.
Offer premium discounts for homeowners who harden their properties against fire.
In exchange, insurers must expand coverage availability statewide, including in high-risk wildfire zones.
"Thank goodness this strategy was implemented before this happened," said Susman. "We're going to see a reshuffling. Rates in higher-risk areas will go up — they have to — but in lower-risk areas, we could actually see rates go down."
It's a bold attempt to balance fairness and financial sustainability — allowing insurers to stay solvent while ensuring homeowners can still find coverage.
Before the fire, State Farm had already made headlines by canceling over 90,000 homeowner policies across California — including 1,626 in the Pacific Palisades alone, the second-highest ZIP code for non-renewals in the entire state.
Those cancellations left many homeowners scrambling for replacement coverage — often through the California FAIR Plan, the state's insurer of last resort.
Now, with the Palisades at the epicenter of this fire, that decision has taken on new weight.
"It's possible that some people simply weren't able to obtain other coverage," Susman admitted. "And yes, that means some homes that burned down could be uninsured or underinsured."
Still, Susman emphasized that for those who did secure replacement policies — even through the FAIR Plan — there's reason for cautious optimism.
"Hopefully, they're with carriers that have sufficient financial stability to handle these claims," he said.
The California FAIR Plan Association has become the lifeline for homeowners unable to find private coverage. But as enrollment swells, questions persist about whether it can withstand another round of catastrophic losses.
Susman explained that while the FAIR Plan's cash reserves are limited, its multi-tiered funding structure provides several safety nets:
Direct reserves — cash held in the plan's accounts.
Reinsurance — coverage purchased from global insurers to back large losses.
Bonding authority — the ability to issue debt if necessary to pay claims.
"They don't have a ton in the bank right now," he admitted, "but they do have access to a lot of money. They're built for this."
That design means that even though the FAIR Plan may be stretched, it won't immediately collapse under the weight of large-scale claims. Still, its long-term sustainability depends on keeping private insurers engaged — something the Sustainable Insurance Strategy aims to achieve.
The next 12 to 18 months will bring a major recalibration of home insurance rates statewide.
In the wake of these fires:
High-risk areas (like canyon communities and forest-adjacent neighborhoods) will see sharp premium increases reflecting real exposure.
Low-risk areas (urban centers or coastal plains) may experience modest rate reductions as insurers redistribute risk.
This risk-based pricing model, long standard in other states, is new for California. It's a key component of the CDI's modernization plan — and, ironically, it might be the very mechanism that keeps insurers from abandoning the state altogether.
"Premiums will reflect the true cost of risk," Susman said. "That's the only way to keep coverage available and affordable in the long term."
One of the most pressing questions is whether affected homeowners will receive enough from their insurers to rebuild.
Susman offered reassurance:
"If written properly, these policies are designed to rebuild homes. The only out-of-pocket should be the deductible."
However, he cautioned that not all homeowners are adequately insured. Those who bought minimal coverage years ago may find themselves underinsured as rebuilding costs have soared 30–50% since the pandemic.
He encouraged homeowners statewide to review policy limits annually and ensure they have Extended or Guaranteed Replacement Cost coverage — optional endorsements that can add 25–50% above the listed dwelling limit.
Whether you've been directly affected or live near the burn zones, Susman advises every Californian to take these steps immediately:
✅ File early: If your home was damaged, contact your carrier or broker as soon as possible. Claims are processed on a first-come basis.
✅ Document everything: Take photos and videos once it's safe. Don't discard damaged items until inspected.
✅ Track communications: Keep records of names, dates, and claim numbers.
✅ Ask for advances: Insurers can issue emergency payments for temporary housing or essentials.
✅ Verify coverage: Even renters policies cover fire and smoke damage.
"This is why you have insurance," Susman reminded viewers. "It's there to rebuild your life. The system works — but you have to engage it."
The true economic and insurance impact of these fires will unfold over years. Beyond rebuilding homes, the state must rebuild confidence — among insurers, reinsurers, and consumers alike.
As Susman put it, this event is not just a natural disaster but a financial and regulatory stress test. If California's new framework holds, it could mark a turning point — one where stability finally returns to the state's embattled insurance market.
"This tragedy is forcing the system to prove itself," he said. "If insurers can pay these claims and stay in business, it will show that California's reforms are working."
The LA wildfires are a defining moment for California — not just in environmental terms, but in economic ones. They expose the fragility of the old system and the urgency of building a sustainable, modern insurance infrastructure that can withstand climate-driven catastrophes.
For homeowners, the message is clear:
Know your policy. Review it annually. Prepare before disaster strikes.
Because in today's California, wildfire isn't a question of if — it's a question of when.
And as Susman concluded, "When that time comes, the difference between financial ruin and recovery is knowing how your insurance really works."
