Estimated read time: 5-6 minutes
- California wildfires intensify insurance challenges, with insurers dropping high-risk clients.
- Utah homeowners face rising insurance costs, with a 54% increase since 2019.
- Experts advise weighing risks and costs for homes in wildland-urban areas.
SALT LAKE CITY — It's too early to gauge the economic impacts of the wildfires still raging in multiple Southern California communities, which had also claimed five lives as of midday Thursday, but estimates already exceed some of the biggest past fire-related events in the Golden State, including the devastating 2018 Camp Fire in California's north central Butte County which led to $12.5 billion in insured losses.
The current fires are roaring amid California's ongoing effort to address the state's precarious home insurance environment. It's one in which widespread losses in recent years have driven some insurers to exit the state entirely and others to drop clients in high-risk areas, particularly those with properties in wildland-urban interfaces where developments abut forest and wilderness areas.
Insurance companies declined to renew 2.8 million homeowner policies in the state between 2020 and 2022, according to the most recent data from the California Department of Insurance. That includes 531,000 in Los Angeles County, where fires are currently raging, according to a report by CNN.
Canceling homeowners' insurance
On Thursday, JPMorgan Chase analyst Jimmy Bhullar updated a Wednesday damage estimate from the current California fires, doubling the value of expected losses on insured properties.
"Expectations of economic losses stemming from the fires have more than doubled since yesterday to closer to $50 billion, and we estimate that insured losses from the event could exceed $20 billion (and even more if the fires are not controlled)," Bhullar wrote in a note to clients.
The current top three costliest wildfires in U.S. history have all occurred in California over the past eight years and include the 2018 Camp Fire, 2017 Tubbs Fire and 2018 Woolsey Fire, according to data from a Wall Street Journal report.
While major national insurers like State Farm and Allstate have recently stopped selling home insurance policies in the state, and some insurers have dropped clients in high-risk areas, California's state-run Fair Plan insurance program functions as an insurer-of-last-resort for homeowners who are unable to find private insurance coverage.
The number of homes in the area affected by the Palisades Fire that are enrolled in Fair Plan almost doubled between 2023 and 2024, said Tim Zawacki, an insurance sector strategist at S&P Global Market Intelligence, per a New York Times report.
"The California insurance market has been balanced on a knife edge," Nancy Watkins, an insurance expert and principal actuary at Milliman, a consulting firm, told the Times. As homeowners begin filing claims, insurers that cover large numbers of dwellings in Southern California could see a drain on their financial reserves, forcing them to drop customers, be punished by investors or exit the state.
Can you get fire insurance in Utah?
California isn't alone when it comes to challenges in the home insurance sector.
Last year, a report from LendingTree found home insurance prices across the country had risen by an average 37.8% from 2019 to 2024, driven mostly by the escalating costs of repairs along with a higher occurrence of natural disasters. And Utah homeowners have been among the hardest hit with rates for Beehive State home insurance policies up by over 54% over that time period, the fourth highest state-level increase in the country.
While tiny in comparison to California's population density inside wildland-urban interface areas, Utah has its own concerns with residential development that borders wilderness and forest, including a ring that roughly follows Salt Lake City's north and east sides and numerous neighborhoods along the Wasatch Valley foothills and in Summit County communities.
On Thursday, the Utah Insurance Department told the Deseret News that insurance companies operating in the state aren't required to report data accounting for the number of policies it cancels or declines to renew but a spokesman for the agency said it's heard anecdotally that some Utah homeowners have struggled to find polices to fit their budgets, and particularly so for properties in wildland-urban interface areas.
To date, the state agency hasn't seen any significant volume of complaints from Utah residents related to loss of insurance or renewal issues based on where their properties are located. The department notes that Utah homeowners have a wide variety of insurance options with around 100 companies currently writing homeowners policies in the state.
Paying a premium
Veteran Utah real estate broker Scott Steadman said he's seen an elevated awareness among homebuyers and sellers in recent years when it comes to the risk issues associated with properties in wildland-urban areas and expects the current rash of California fires will push the issue even higher in the minds of those in the market.
Steadman, who runs Windermere Real Estate's Draper office, also happens to be a resident of one such neighborhood as a homeowner in the Suncrest area on Draper's east side foothills below Lone Peak. He noted that those looking for properties in areas where development meets wilderness are typically seeking the amenities that come along with the location, like better air quality, easy access to trails and less dense neighborhoods.
But he said choosing to live in these areas comes with an affordability premium thanks to higher insurance costs and added responsibilities, like maintaining adequate in-home fire suppression measures along with outdoor duties, like managing vegetation and appropriate fire-break landscaping.
"People just have to weigh the inherent risk and added costs against what they're seeking in a home location," Steadman said. "There are definitely financial implications that go with the lifestyle choice."
Steadman also encouraged those living in wildland-urban areas to educate themselves about wildfire safety and seek out expert advice on safety strategies.
Those interested in learning more about keeping homes, properties and lives safe in wildland-urban interface zones can visit the Utah Division of Forestry, Fire and State Lands' resource page for more information.
