(David McNew/Getty Images)
California’s insurance authority rushed to impose a yearlong ban on policy cancellations in parts of Los Angeles hardest hit by the apocalyptic wildfires that continued to sow destruction as of Friday.
Insurance Commissioner Ricardo Lara on Thursday issued a mandatory moratorium that prohibits insurance companies from pulling the plug on coverage in the Pacific Palisades neighborhood and the area outside Pasadena affected by the Eaton fire through Jan. 7, 2026.
“Losing your insurance should be the last thing on someone’s mind after surviving a devastating fire,” Lara said in a statement. “This law gives millions of Californians breathing room and hits the pause button on insurance non-renewals while people recover.”
The commissioner added that the ban applies to all homeowners within the perimeters or adjoining ZIP codes of the Palisades and Eaton fires, regardless of whether they suffered a loss.
(Wally Skalij/Los Angeles Times via Getty Images)
The announcement comes just weeks after the commission unveiled a new rule requiring private insurance firms to start writing new policies in high-risk areas if they wanted to keep doing business in California, but with the concession that they would be allowed to pass the costs on to their customers.
As of Friday, the wildfires have killed at least 10 people and incinerated more than 36,000 acres of land in and around L.A., in some cases annihilating entire residential blocks.
Upwards of 10,000 structures, including private homes and businesses, have been razed—more than half of them in the upscale, star-studded community of Pacific Palisades, where the unprecedented wildfire bearing its name continued spreading largely uncontained, according to the latest figures from Cal Fire.
The natural disaster comes just months after some 1,600 policies in the tony community of 23,000 people—which, until this week, was home to such A-listers as Tom Hanks and Rita Wilson, Ben Affleck, and Reese Witherspoon—were canceled by private insurers over high fire risks.
It was not the only location in California to experience insurance woes.
During the same time period, which coincided with massive wildfires in the Golden State, nearly a dozen major insurance providers like State Farm, Nationwide, Farmers Insurance, Allstate, USAA, and The Hartford one by one either stopped writing new policies in high-risk areas or limited their coverage.
Unable to find a private insurer willing to provide a policy due to the risk of huge payouts, close t0 500,000 Californians were forced to enroll in the Fair Access to Insurance Requirements (FAIR) Plan, the state-sponsored insurer of last resort. For example, in the Palisades neighborhood alone, more than 1,400 homes were covered by the FAIR Plan last year, up 85% from last year, according to Reuters.
This ongoing insurance crisis was in full swing in California when the wildfires overwhelmed the L.A. area this week.
Late Thursday, AccuWeather estimated the total economic loss to Southern California from the wildfires to be between $135 billion to $150 billion. And the true figure could be even higher, depending on how much more damage the infernos will inflict before they are finally extinguished.
(Mario Tama/Getty Images)
“These fast-moving, wind-driven infernos have created one of the costliest wildfire disasters in modern U.S. history,” stated AccuWeather Chief Meteorologist Jonathan Porter. “Hurricane-force winds sent flames ripping through neighborhoods filled with multi-million-dollar homes. The devastation left behind is heartbreaking and the economic toll is staggering. To put this into perspective, the total damage and economic loss from this wildfire disaster could reach nearly 4 percent of the annual GDP of the state of California.”
J.P. Morgan analysts have projected that fire-related insured losses could climb as high as $20 billion, up from their initial estimate of $13 billion. In the Palisades community alone, where the median list price was $4.72 million as of December 2024, according to data from Realtor.com®, there were $6 billion in potential claims.
But the trouble is, the FAIR Plan has only about $700 million in cash, according to testimony given to the California State Assembly last year, raising concerns that the state-backed insurer could become insolvent.
FAIR Plan spokesperson Hilary McLean warned that it could take years to accurately calculate total losses from the Los Angeles fires, but she stressed that the insurer anticipates being able to pay out claims related to the disaster.
“We are aware of misinformation being posted online regarding the FAIR Plan’s ability to pay claims,” she said in a statement. “The FAIR Plan has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid.”
If the plan does run out of funds, it could turn to private insurers operating in California for a bailout, but they could then ask the state for permission to hike premiums for their customers.
And the FAIR Plan is not the only insurance entity that would be on the hook for billions of dollars once the claims from Los Angeles start rolling in.
Three major private companies—Allstate, Chubb, and Travelers—are expected to bear the brunt of the estimated $20 billion in insured losses because of their outsized presence on the California insurance market, according to MarketWatch quoting J.P. Morgan.
“This would make this event significantly more severe than the 2018 Butte County Camp Fire, the highest insured-loss wildfires in California’s history previously,” with insured losses of about $10 billion, the analysts said.
Snejana Farberov is a reporter at Realtor.com covering the U.S. housing market and the latest domestic real estate trends. She has worked as a general assignment journalist in New York City and Long Island for 16 years, writing for New York Post, Daily Mail, and News 12. Snejana earned bachelor's degrees in journalism and Italian from St. John's University, followed by a master’s degree from Columbia University School of Journalism.
Reality TV
Trends
Celebrity Real Estate
A local real estate agent can answer questions, give guidance, and schedule home tours.
By proceeding, you consent to receive calls and texts at the number you provided, including marketing by autodialer and prerecorded and artificial voice, and email, from Realtor.com and othersPersons who may contact you include real estate professionals such as agents and brokers, mortgage professionals such as lenders and mortgage brokers, realtor.com and its affiliates, insurers or their agents, and those who may be assisting any of the foregoing. about your inquiry and other home-related matters, but not as a condition of any purchase. More
To connect right away, call (855) 650-5492