One year after the January 2025 Los Angeles wildfires, Gallagher Re's property specialists have released an analysis of California's wildfire risk landscape. The event ranks as the costliest wildfire sequence ever recorded by the insurance industry.
The broker's analysis identifies a shift in how wildfire risk is distributed across the state. While Southern California has historically been viewed as the primary driver of statewide insured losses, data now shows that Northern California has experienced a notable increase in fire frequency and size.
Average annual loss is now split almost 50:50 between the two regions. However, Southern California retains twice the exposure in high and extreme risk zones, with an average maximum loss nearly two times costlier than Northern California.
Gallagher Re benchmarked the total insured value exposed to the January 2025 Los Angeles fire perimeter as a 1-in-35-year event. The broker said this establishes a new baseline reflecting the current state of climate and exposure conditions.
The analysis also highlighted potential coverage gaps stemming from debris and mudflows in burn areas. Insurers face complex disputes over proximate cause, particularly regarding whether flood damage, which is largely uninsured, resulted from the covered peril of fire.
Gallagher Re pointed to a pattern of "weather whiplash," where wet winters generate more vegetation, followed by dry seasons and Santa Ana winds that strip moisture and accelerate fire spread.
Recovery efforts have proceeded slowly despite the scale of the disaster. According to Howden Re, only about 16% of rebuild permits have been issued nearly a year after the fires. The reinsurer also noted that many insurers sold subrogation rights to hedge funds, with Eaton recoveries fetching 40 to 50 cents on the dollar while Palisades recoveries sold for pennies.
On the regulatory front, California Proposition 103 has undergone amendments after more than 30 years. The reforms now permit carriers to incorporate forward-looking models and reinsurance costs into underlying rates. In return, insurers must write policies in high-risk areas.
Gallagher Re noted that its wildfire tool identified 100% of properties within the January 2025 fire perimeters as "extreme." The broker also emphasized the importance of managing accumulation risk, as concentrations of exposure disproportionately affect tail risk and increase reinsurance financing costs.
