Los Angeles fires highlight risk of 'uninsurable future,' experts say

Many insurers reduced or ended policies in California before the wildfires.

Soon after wildfires broke out in Los Angeles, California, earlier this month, Jewlz Fahn received a panicked call from her husband, Terry, telling her they needed to evacuate their home in the Pacific Palisades.

"For some reason, I wasn't thinking clearly. I grabbed a pair of shorts because I was like, well, it might be hot later today," Terry Fahn said. "I was thinking about packing more. But I was like, 'We'll be back.' And that was a mistake."

The couple lost their home in the fire and nearly all of their possessions. While they wait for a rental property to become available, Jewlz and Terry are now living in a hotel room with their dog Coda.

Jewlz and Terry Fahn make up one of thousands of Los Angeles households seeking to recover their losses after the devastation. The fires destroyed more than 13,000 structures, contributing to more than $250 billion in total damages, according to weather forecasting service AccuWeather.

Insurance companies typically fill the gap, helping homeowners overcome their losses and rebuild their homes. After a natural disaster of this scale, however, questions abound over whether residents will be able to access the funds they need. It’s a nationwide trend amid increasingly frequent climate disasters that some experts say could lead to an "uninsurable future."

Jewlz and Terry Fahn said they will need to file a claim under the FAIR Plan, the state's insurer of last resort. According to state officials, the number of policies under the FAIR Plan has more than doubled from 2020 to 2024. The FAIR plan offers more expensive coverage than many of its private sector counterparts, while providing limited coverage.

The Fahns had to sign on after State Farm opted against renewal of their fire policy last fall, just a few months before the fire destroyed their home.

"I just couldn’t believe it. We’ve been a State Farm customer for more than 20 years," Jewlz Fahn said. "We paid on time. We never made a claim. There's no reason for them to drop us. It's just unfathomable."

The couple became concerned last March when State Farm announced that it would not renew 72,000 policies in California to "insure its long-term sustainability." Then in July, they received a letter from State Farm saying the insurer was cancelling their fire coverage because of “substantial wildfire… hazards.” The Fahns were notified that their policy would expire Oct. 14, 2024, less than three months before the fires broke out in Los Angeles.

In a statement to ABC News, State Farm said that its "non-renewal decisions were not made lightly and only after careful analysis of [their] future capacity to serve their customers."

In a letter to the Fahns that they provided to ABC News, State Farm cited "substantial wildfire … hazard" as part of the reason behind the decision against renewal of their fire coverage policy.

State farm also said they “...understand this is a very difficult time for those impacted by these wildfires…” and that they “...are on the ground helping our customers recover.” Additionally, they said they “...have already put more than half a billion dollars back into customers’ hands” since the start of the fires this year.

At least 10 major insurers have either left or reduced coverage in California in the past four years. During that time, the number of homeowners signing up for the state's insurer of last resort has doubled, officials said.

In the past two years, insurers including Allstate, American National, The Hartford and State Farm stopped issuing new fire policies for California homeowners.

Sean Kevelighan, CEO of the Insurance Information Institute, said insurers face no choice but to drop policies in California, since regulators prevented the companies from raising rates enough to account for the growing wildfire risk.

"Insurers absolutely want to be doing business in a state like California that is one of the largest economies in the country," Kevelighan said. "But when they're forced to underwrite in a way that simply [is] not profitable … they have to send those non-renewal notices."

An aerial view of homes destroyed in the Palisades Fire, Jan. 27, 2025, in Pacific Palisades, Calif.
Mario Tama/Getty Images

Even amid the growing climate risk in states like California, the property and casualty insurance industry earned record profits in 2023 totaling $88 billion, according to the National Association of Insurance Carriers, or NAIC. Last year, the industry far exceeded that record, bringing in $130 billion in profits over the first nine months of 2024, credit rating agency AM Best found.

"They're supposed to be a risk-bearing industry, but now, even the slightest hint of what might be a new risk and they're walking away," Douglas Heller, director of insurance at the Consumer Federation of America, told ABC News. "The insurance companies have bulked up their profits even as they were walking away from our state and our communities."

Kevelighan disputed such criticism, saying focus on the overall strength of the property insurance industry risks overlooking the business impact of high costs tied to climate events like the California wildfires.

"So taking aggregate figures from an industry that represents a large amount of our economy and employs over 3 million people in this country, I think we want to also put it into perspective … these large numbers that we're talking about here," Kevelighan said.

Criticism from consumer advocates not only targets the profits earned by insurance companies but also the investments made by the firms. The nation’s insurers hold more than $500 billion in fossil fuel-related assets, according to a study published last year by climate advocacy groups Ceres and Environmental Resources Management, as well as risk-assessment firm Persefoni.

Insurers’ holdings in fossil fuel-related assets help perpetuate the climate risk the companies cite for their choice to pause or withhold coverage for some customers, Dave Jones, who served as the California insurance commissioner from 2011 to 2018, told ABC News.

"The major driver of climate change is our failure to transition from fossil fuels and greenhouse gas emitting industries,” Jones said. “Why are U.S. insurers allowed to invest over half $1 trillion in the very industry of the fossil fuel industry whose emissions are making it challenging, if not impossible, for them to write insurance for real people and real businesses?”

But Kevelighan says these investments are necessary to help insurance companies have enough capital on hand to pay out claims.

"I would argue that the investments of the insurance industry are far outweighed with the likes of bonds and fixed investments that are doing more for community building," Kevelighan said. "Regardless of where you stand … our world is reliant on fossil fuels. That's just a state of where we are."

He added, "As an industry as a whole, this industry is dedicated to keeping capital on hand for the long term so it can pay its claims."

For her part, Jewlz Fahn said she knows that her claim through the California FAIR Plan won’t cover everything that she lost in the fire. Fahn said she’s still struggling to understand why her insurance company wasn’t there to provide a safety net.

"I'm still very scared thinking about how little we are going to get and what we should be getting for our home and for our loss," she said.

"Insurance companies are supposed to protect you. That's why they're there," she went on. "So it makes no sense why they would drop us or anyone else, especially when they have the funds to insure people."

ABC News' Lindsey Feingold, Ish Estrada, Lissette Rodriguez, Connor Burton, Matthew Glasser and Alexis Christoforous contributed to this report.

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