KCC estimates $28bn insured losses for Palisades, Eaton fires

KCC estimates that the insured loss from privately insured and FAIR plan policies to residential, commercial, and industrial properties, and autos from the Palisades and Eaton Fires will be close to $28bn.

Estimated losses include damage from the fires, as well as smoke, time-element losses for residents in evacuation zones whose homes were not damaged by the fire, guaranteed replacement cost coverage, and demand surge.

These losses should be covered by typical insurance policies, KCC observed.

“California authorities have a strong incentive to stabilise the insurance market so there will likely be efforts in place to expedite the rebuilding process, control cost increases, and avoid saddling insurers with excess and uncovered losses,” said the catastrophe risk modeller.

“A primary area of uncertainty in the loss estimates is the proportion of homeowners and business owners in impacted areas who are insured. KCC has assumed that the majority of properties in the area are insured either privately or through the FAIR plan, but the $28bn estimate contemplates a small percentage that are likely uninsured,” the cat modeller added.

KCC provided its summary of the evolution of the wildfire event.

Plentiful rains during winter of 2023- 2024 had spurred abundant vegetation growth in Southern California, the firm noted.

Secondly, less than a quarter inch of rain fell from May 2024 to January 2025, creating severe drought conditions that dried out vegetation.

In the early morning of January 7, a high-pressure system settled over the Great Basin and a low-pressure system (that would later become Winter Storm Cora) moved onshore near Baja California.

The pressure gradient between the two systems, amplified by the jet stream aloft, created a powerful Santa Ana wind event, KCC noted.

The Palisades and Eaton fires both ignited on January 7, “from ignition sources that have not been conclusively identified and remain under investigation”, KCC said.

Wind gusts exceeding 80 mph caused the fires to spread rapidly and hampered firefighting efforts.

Within two days of the fire ignitions, KCC scientists notified clients the fires had already caused more than $16bn in fire damage.

Santa Ana winds had dissipated somewhat on January 9 and continued until January 15 at a lower intensity, KCC noted.

Additional fires started nearly every day that week, but all other fires were contained before causing significant damage, the summary added.

KCC also provided a summary of the impacts of the two major fires.

“The Palisades Fire burned nearly 24,000 acres across the Santa Monica Mountains and the towns of Pacific Palisades and Eastern Malibu. The Eaton Fire burned over 14,000 acres across the Angeles National Forest and the towns of Altadena and Sierra Madre.

“Along with the devastating fire damage, the fires are likely to produce a high volume of smoke claims that extend far beyond the fire perimeters. Most of the claims will result from the Eaton fire, which emitted high concentrations of smoke that were transported across the Los Angeles basin.

“Smoke from the Palisades Fire was largely pushed offshore during its most active burning period. Based on satellite imagery, the image [above] show’s KCC’s preliminary analysis of damaged structures within the Eaton Fire perimeter.

“While most structures were totally destroyed, some have survived as expected. This is due to both randomness and effective mitigation strategies. KCC engineers will be conducting more extensive investigations of the fires with upcoming post-event damage surveys.”