“Given the severity of recent wildfires in Los Angeles, the reinsurance market in California is expected to become even more challenging,” says Ming Li, partner, EVP, and global head of catastrophe modelling at Acrisure Re.
Li adds that the growing demand for reinsurance calls for innovative capital solutions, such as insurance-linked securities or parametric solutions.
According to data from Acrisure Re, the Palisades Fire and Eaton Fire have devastated Southern California, burning over 37,000 acres since igniting on 7 January. Together, they have caused at least 24 fatalities and destroyed or damaged upwards of 18,000 structures.
Li explains how these fires are reshaping the (re)insurance landscape: "The consecutive active wildfire years in California in 2017-2018 partially contributed to the end of the soft reinsurance market in 2014–2017 and paved the way for the hard reinsurance market in 2023–2024.
“During this challenging market, reinsurance retentions have steadily increased and have remained elevated on 1 January 2025 renewals.”
Estimates place insured losses from the fires at US$25 billion, with potential economic losses exceeding US$50 billion. These figures may rival or surpass those from the 2017-2018 fire seasons, among the most destructive in California’s history.
