Los Angeles wildfires: Moody’s RMS estimates insured losses could reach $30 billion  

Moody’s RMS Event Response has projected that insured losses from the Los Angeles Firestorm events in January 2025 could range between $20 billion and $30 billion. 

This initial estimate is based on the impacts observed so far, though it comes with considerable uncertainty as several fires are still ongoing. The Palisades Fire is currently 31% contained, while the Eaton Fire is 65% contained.  

The Moody’s RMS Event Response team is actively monitoring the situation and analysing the complexities of the event as it develops, aiming to provide a comprehensive industry loss estimate, it said in an official release.  

This will be finalised through modelling, field reconnaissance, and validation in the coming days after full containment. A final insured industry loss estimate will be issued once the fires are fully contained. 

Mohsen Rahnama, Chief Risk Modeling Officer at Moody’s, said, “The ongoing Los Angeles Firestorm presents a unique and complex situation that should serve as a wake-up call for the market. While the fires have been unfolding, there remains significant uncertainty due to multiple factors, including potential insurance gaps and underinsurance, the high value of properties and contents at risk, and considerable additional living expenses (ALE) due to the evacuation of over 100,000 people.” 

“The fires have caused widespread damage not only to properties but also to critical infrastructure, such as water systems and utilities, leading to potential economic consequences far beyond insured property losses. This event is likely to prompt regulatory changes in California and may accelerate the use of risk modelling to help the insurance industry address the growing risk landscape, influenced by exposure increases and climate change,” Rahnama added. 

As damage assessments continue, numerous factors contribute to the uncertainty, including the need to comply with local building codes, such as seismic upgrades during reconstruction, as well as the time-consuming costs associated with debris removal and soil abatement. Coverage for high-value assets, such as autos, fine art, collectibles, and other valuable items from properties in affluent neighbourhoods, will also be a factor in the total loss estimate. 

The demand for labour and materials will likely further increase costs, especially if rebuilding is expedited. Los Angeles is preparing for major global sporting events, including eight matches for the 2026 FIFA World Cup in June, which may necessitate accelerated infrastructure rebuilding to accommodate these events, the release added. 

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 sectors.  

The estimate also accounts for the complexity of reconstruction, including cleanup costs, permit fees, code improvements, and potential law and ordinance expenses. Additionally, the estimate reflects the California FAIR Plan’s exposure, which had over $112 billion in liabilities (representing 23% of its portfolio) in Los Angeles County as of September 30, 2024. 

Firas Saleh, Director of North America Wildfire Models at Moody’s, said, “This firestorm is the most destructive and multifaceted wildfire event in US history, with unprecedented urban conflagration levels. However, it was not a ‘black swan’ event, considering the escalating wildfire risks in recent years.” 

On January 7 and 8, 2025, wildfires erupted across multiple regions of Southern California near Los Angeles, spreading rapidly under dry conditions and strong Santa Ana winds. The area affected by these wildfires is roughly three times the size of Manhattan. Key fires include the Eaton Fire, which has caused damage to over 7,000 structures, and the Palisades Fire, which has impacted around 5,000 structures.