It’s Not Just the Climate

As global warming alters traditional climate patterns, weather-related disasters are becoming more severe and expensive to insure.

In 2024, 27 weather/climate disaster events in the United States cost more than $1 billion each, according to the National Oceanic and Atmospheric Administration (NOAA). These events encompassed one drought, one flooding event, 17 severe storms, five tropical cyclones, two winter storms, and a single wildfire in New Mexico that destroyed 1,400 houses and other structures.

The disasters were spread across much of the country, with the Midwest and Southeast experiencing the brunt. The total economic cost was $417 billion, of which insurers covered $154 billion, Gallagher Re reported.

Over the past 14 years, the country has annually experienced 10 or more billion-dollar weather/climate disaster events. The aggregate cost over that period was $1.4 trillion in damage, NOAA stated. The frequency and severity of hurricanes, tornadoes, wildfires, and severe convective storms is not a U.S. phenomenon. Approximately $368 billion in economic losses worldwide due to weather-related disasters were recorded in 2024, with 60% of the property damage uninsured, according to insurance broker Aon.

Climate change factors into the greater frequency and intensity of the Santa Ana winds in the fires that devastated Los Angeles in January. According to a study published in the journal Science that analyzed 60,000 fires across the United States since 2001, wildfires are growing faster and doubling in frequency.

Other factors include alternating periods of heavy rainfall and severe droughts. An analysis of the five weeks leading up to the fires by the Insurance Institute for Business & Home Safety found evidence of a flash drought affecting Los Angeles County. While no drought conditions were observed on Dec. 3, 2024, by Jan. 7, 2025, nearly 60% of the county—including the area impacted by the Palisades and Eaton Fires—was experiencing severe drought conditions.

A century of real estate development and human settlement in Los Angeles and fire-prone regions nationwide have further increased fire damage risks. Since 1960, the city’s population has increased by 60%. One in eight properties sprawled across Los Angeles now confront a “very high” fire risk, catastrophe modeler CoreLogic estimated.

Depending on the catastrophe modeler, the Palisades and Eaton fires are combined estimated to cost between $20 billion and $45 billion in insured losses, with most projections in the $30 billion range. The other wildfires that ignited in and around Los Angeles during the same period will add to this sum.

Southern California is far from the only place in America susceptible to such risks. Florida, Texas, Arizona, Idaho, Nevada, Oklahoma, Arkansas, Wyoming, Utah, and Montana have either a moderate or high wildfire risk, says ClimateCheck, a provider of detailed climate risk data on individual properties and geographic corridors. In Montana and Wyoming, 50% of buildings at a minimum are at risk of wildfires, according to First Street Foundation, a nonprofit organization that uses scientific methods to evaluate climate risks.

While the wildland-urban interface—the thousands of homes and businesses close to Los Angeles’ myriad mountain ranges—has the highest risk of a wildfire, the Santa Ana winds launch this threat to nearby communities. A single ember can travel at speeds exceeding 60 mph due to the Santa Ana’s powerful gusts, which surpassed hurricane-force winds of at least 80 mph on Jan. 7, the day the Eaton and Palisades fires erupted. Some reports suggested that in higher elevations, the gusts reached 100 mph.

Los Angeles was in the midst of extremely dry conditions when the infernos ignited. No precipitation had been recorded since March 2024, following two years of heavy rainfall that turned the San Gabriel Mountains and Verdugo Hills as green as the Cascade Range in Washington state. When grasses and shrubs dried out, conditions were ideal for a conflagration. Approximately 23,713 acres in the Palisades Fire and 14,021 acres in the Eaton Fire were scorched, CAL FIRE reported.

Risk Management and Mitigation

California has a long history of massive wildfires and dry years following wet ones. In the early 20th century, when carbon emissions were miniscule, wet and dry spells proliferated much as they do presently. According to the U.S. Geological Survey, the frequency of large wildfires in Southern California has remained relatively constant over the last century. What has not kept pace is the state’s forest management and fire suppression, political opponents to the state’s Democratic stronghold assert.

Rep. Tom McClintock, a Republican who represents California’s 5th Congressional District, commented in a Wall Street Journal op-ed that, “Despite sky-high taxes and government spending,” Los Angeles “cut its already underfunded [Fire Department] budget by more than $17 million last year. The city spends almost twice as much as the fire department’s budget on homelessness projects.”

California Gov. Gavin Newsom overstated the number of acres treated with fuel breaks and prescribed burns in high-priority areas of the state by 690%, asserting 90,000 acres rather than the actual 11,399 acres, according to an investigation by CapRadio and NPR’s California newsroom.

Los Angeles Mayor Karen Bass also confronts withering criticism.

Growing frustration with the mayor’s absence during the breakout of the fire—she was on a diplomatic mission to Ghana—in addition to reports of non-functioning fire hydrants, an empty reservoir in the Pacific Palisades under repair during a period of extreme wildfire risk, an evacuation alert system that failed to notify all residents of Altadena, and a firefighting budget that was cut by $17.6 million have undermined the public’s trust in her leadership, the Associated Press and other media outlets reported.

Going forward, leadership is crucial. Either governments take concrete steps to reduce wildfire risks and increase the resilience of structures to withstand fires, or their constituents will pay increasingly more in insurance premiums. “Every dollar put into hazard mitigation brings a return on that investment of six dollars,” says Daniel Kaniewski, former deputy administrator for resilience at the Federal Emergency Management Agency, and presently managing director, public sector, at Marsh McLennan. “The more we get out that message, the better.