Moody’s RMS Event Response estimates insured losses for the January 2025 Los Angeles Firestorm events will likely range between US$20 billion and US$30 billion.
This preliminary estimate reflects impacts observed to date, with significant uncertainty as some of these fires are ongoing. Currently, the Palisades Fire is 31 percent contained and the Eaton Fire is 65 percent contained. Moody’s RMS Event Response team is closely monitoring the situation and working to analyze the complexity of this event as it unfolds, to form a comprehensive view for final industry loss estimates through modeling, reconnaissance, and validation over the coming days. Moody’s RMS Event Response will issue its final insured industry loss estimate for these events after their full containment.
Mohsen Rahnama, Chief Risk Modeling Officer, Moody’s, commented: “The ongoing Los Angeles Firestorm events represent a unique and complex scenario that serves as a wakeup call for the market. As the events have unfolded over the last couple of weeks, great uncertainty remains from numerous elements including potential insurance gaps and underinsurance given the evolving insurance landscape, high-value building and contents exposure at risk, and significant additional living expenses (ALE) resulting from the evacuation of over 100,000 people.”
“The wildfires caused extensive damage beyond property to critical infrastructure, including water systems and other utilities, with potential economic impacts that could be several multiples of insured property losses. This event will likely precipitate ongoing regulatory changes in California and accelerate usage of risk modeling to enable the insurance market to play its critical role in managing the dynamic risk landscape driven by exposure growth and climate change.”
As damage assessments continue, many factors contribute to the uncertainty. These include complying with ordinance and law requirements such as local building codes that mandate seismic upgrades or modifications when rebuilding, costs associated with debris removal and soil abatement that can take months – as well as coverage and extra expenses from high-value assets such as auto, fine art, collectibles, and valuable contents from properties in affluent neighborhoods impacted by the fires. Moreover, the demand for labor and materials will further escalate costs, especially if rebuilding is accelerated. Los Angeles is set to host major global sports events in the next few years, including eight matches in June 2026 for the FIFA World Cup 26™, which may force expedited rebuilding of the area’s infrastructure to support these events.
This Moody’s RMS Event Response estimate includes losses from property damage, including evacuation and smoke damage, business interruption (BI), and additional living expenses (ALE) across residential, commercial, and industrial lines. Losses also consider a wide range of complex factors around reconstruction costs after the wildfires including cleanup, costs associated with permit fees, code improvements, and potential law and ordinance expenses. The estimate also accounts for the California FAIR Plan, which has more than US$112 billion exposure, or 23 percent of its portfolio, in Los Angeles County as of September 30, 2024.
This estimate is based on the Moody’s RMS U.S. Wildfire HD Model Version 2.0, part of the North America Wildfire HD Models suite, released in October 2024. Covering the contiguous U.S. states and Hawaii, the model equips stakeholders with a superior tool for risk evaluation. It incorporates significant enhancements that respond to recent increases in wildfire severity, exposure growth in high-risk areas, rising reconstruction costs, and evolving regulatory and market dynamics. Moody’s recently submitted a petition to the California Department of Insurance for review and the certification of Moody’s RMS U.S. Wildfire HD Model Version 2.0 to enable carriers to use the model in rate filings.
Firas Saleh, Director – North America Wildfire Models, Moody’s, commented: “This firestorm is the most destructive and multifaceted wildfire event in U.S. history, with unprecedented levels of urban conflagration. However, this was not a ‘black swan’ event given the escalating wildfire risk in recent years. The comprehensive event catalog in our recently released Moody’s RMS U.S. Wildfire HD Model Version 2.0 includes numerous similar scenarios of extreme urban conflagration in exactly the same affected regions as the ongoing fires. By capturing the risk profile comprehensively, our models provide unparalleled insights to help the market understand and prepare for these catastrophic events.”
On Tuesday, January 7, and Wednesday, January 8, wildfires ignited across multiple areas of Southern California surrounding Los Angeles and spread quickly under dry conditions and extremely strong Santa Ana winds. The area burned by these wildfires equates to an area approximately three times the size of Manhattan, New York. Major fires in the firestorm include the Eaton Fire; estimated to have damaged or destroyed over 7,000 structures, and the Palisades Fire, which has affected around 5,000 structures.