A year after the devastating Los Angeles wildfires of January 2025, the insurance and reinsurance industry is still absorbing the scale of their impact, as well as the lessons learned for future risk assessment. What is now clear is that these fires were not an anomaly but a warning signal for how wildfire risk is evolving in a changing climate.
The financial consequences of the LA wildfires were significant. To date, insurers have paid out approximately $22.4 billion, with total insured losses reaching around $40 billion overall. These figures place this firmly among the most costly natural catastrophe events in recent US history, reinforcing wildfire's status as a primary driver of loss rather than a secondary peril.
The sparks behind the blaze
In the year since, investigators have been able to piece together a clearer picture of how the fires began and why they escalated so rapidly. The initial blaze, the Palisades Fire, was started by human activity. Emergency services believed the fire had been successfully extinguished, but a combination of Santa Ana winds and exceptionally dry conditions caused it to re-ignite, with devastating consequences.
The second major event, the Eaton Fire, was ignited by a nearby power line. While these two fires inflicted the most severe damage, they were only two of 14 separate wildfires that occurred across the region during January 2025.
Climate change also played a central role in amplifying their severity. Heavy rainfall during 2022 and 2023 drove extensive vegetation growth across California. This period of abundance was followed by a prolonged drought, which dried out that vegetation and transformed it into highly combustible fuel. In effect, climate volatility, not just warming, created ideal conditions for wildfire spread.
A global shift in wildfire behavior
The human cost of these events has also been profound. While 31 deaths were attributed directly to the fires, a medical study published in JAMA (The Journal of the American Medical Association) estimates that up to 400 additional deaths may have been caused indirectly, driven by poor air quality and reduced access to healthcare during and after the events. Further, more than 100,000 homes were evacuated, disrupting communities and livelihoods on a massive scale.
Taken together, these impacts underscore a sobering reality: wildfire risk is no longer confined to historically defined burn areas or traditional seasonal expectations. The LA fires echoed patterns seen elsewhere, including the Australian bushfires of the same year, where successive wet years followed by extreme heat produced similarly combustible landscapes.
The diversity of ignition sources - human activity, infrastructure failure, weather-driven re-ignition, and climate change - highlights a critical challenge for risk modelling: wildfire cannot be understood through a single causal lens and the parallels seen across hemispheres point to a global shift in wildfire behavior.
What this means for our industry
For underwriters, the key takeaway is clear and urgent: past bushfire and wildfire burn areas are no longer a reliable predictor of future fires. Historical loss data, while still of value, cannot on its own capture the rapidly changing interactions between climate, vegetation, weather extremes, and ignition sources.
These distinctions matter. The latest wildfire models, such as BirdsEyeView's, for instance, explicitly focus on different ignition mechanisms, recognizing that the probability, timing, and severity of fires vary materially depending on how they start and how environmental conditions evolve around them. Treating wildfire as a homogeneous peril obscures these dynamics and increases underwriting blind spots.
This has significant implications for pricing, accumulation management, and capital allocation. Wildfire has firmly shifted from a 'secondary' peril into a core driver of portfolio performance. Models calibrated on assumptions of climate stationarity risk lagging reality at precisely the moment when precision matters most.
Progress lies in prediction
Looking ahead, the industry's ability to adapt will depend on its willingness to embrace climate-aware, data-driven analytics. Advances in satellite observation and machine learning now allow us to monitor fuel load, vegetation stress, and environmental conditions in near real time, enabling earlier detection of emerging risk patterns and more responsive underwriting decisions.
The lessons from the LA wildfires, one year on, are therefore not only about loss – they are about learning. If reinsurers and insurers can move beyond retrospective modelling and adopt adaptive intelligence, they will be far better positioned to navigate the growing volatility of wildfire risk.
In a world where climate dynamics are rewriting the rules, resilience will belong to those who can see risk forming before it ignites.
