The scale of losses anticipated in the wildfires now ringing Los Angeles, as well as regulatory changes enacted late last year, could spell an end to relatively cheap homeowners’ insurance in areas like the Palisades that are at elevated risk for wildfires, four analysts told Reuters.
“One sees relatively low premiums in high-risk markets in California, but that might be starting to change,” said Philip Mulder, a University of Wisconsin professor who studies the industry.
Measured against home values, insurance costs are cheaper in the Palisades than in 97% of U.S. postal codes, according to a Reuters analysis of a national database of price data collected by Mulder and University of Pennsylvania’s Wharton School professor Benjamin Keys as well as home-value data calculated by Zillow, a real-estate firm.
Homeowners in Pacific Palisades paid a median insurance premium in 2023 of $5,450, according to the data compiled by Mulder and Keys. That’s less than residents paid in Glencoe, Illinois, an upscale suburb of Chicago where homes are two-thirds cheaper and the risk of wildfire is minimal.
The insurance industry in the U.S. has struggled to keep pace with extreme weather events in recent years, with more than two dozen billion-dollar wildfires, floods and other climate-related disasters in 2023 alone.
In hurricane-prone areas of Louisiana and Florida, insurance prices more than doubled after hurricanes in 2020, 2021 and 2022 threw state markets into turmoil, Keys and Mulder found.
