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FRIDAY, JANUARY 17, 2025: 21:00 UTC
Moody's RMS Event Response has issued a media announcement with an estimate of the insured losses to date for the January 2025 Los Angeles firestorm; read the full announcement here.
The preliminary estimate reflects impacts observed to date, with significant uncertainty as some of these fires are ongoing. Moody’s RMS Event Response team is closely monitoring the situation and working to analyze the complexity of this event as it unfolds. Over the coming days they will form a comprehensive view for their final industry loss estimates through modeling, reconnaissance, and validation, and issue a final insured industry loss estimate for these events after their full containment.
Mohsen Rahnama, Chief Risk Modeling Officer, at Moody’s, commented:
“The ongoing Los Angeles Firestorm events represent a unique and complex scenario that serves as a wakeup call for the market. As the events have unfolded over the last couple of weeks, great uncertainty remains from numerous elements including potential insurance gaps and underinsurance given the evolving insurance landscape, high-value building and contents exposure at risk, and significant additional living expenses (ALE) resulting from the evacuation of over 100,000 people.”
The estimate is based on the Moody’s RMS U.S. Wildfire HD Model Version 2.0, part of the North America Wildfire HD Models suite, released in October 2024. Covering the contiguous U.S. states and Hawaii, the model equips stakeholders with a superior tool for risk evaluation. It incorporates significant enhancements that respond to recent increases in wildfire severity, exposure growth in high-risk areas, rising reconstruction costs, and evolving regulatory and market dynamics.
Firas Saleh, Director – North America Wildfire Models, Moody’s, commented:
“This firestorm is the most destructive and multifaceted wildfire event in U.S. history, with unprecedented levels of urban conflagration. However, this was not a ‘black swan’ event given the escalating wildfire risk in recent years. The comprehensive event catalog in our recently released Moody’s RMS U.S. Wildfire HD Model Version 2.0 includes numerous similar scenarios of extreme urban conflagration in exactly the same affected regions as the ongoing fires. By capturing the risk profile comprehensively, our models provide unparalleled insights to help the market understand and prepare for these catastrophic events.”
Read the full media announcement here.
THURSDAY, JANUARY 16, 2025: 10:00 UTC
In a USA TODAY article looking at the Eaton wildfire's impact on the Altadena community in Los Angeles County, some ten miles northwest of downtown Los Angeles, Firas Saleh, director of product management of Moody's provided comments on the level of insurance coverage in this vibrant town home to 44,000 people.
The Eaton Fire started early evening local time on January 7 in the Eaton Canyon area of the Angeles National Forest, in the hills overlooking Altadena. By noon the next day (January 8), the fire had grown to some 10,000 acres according to CAL FIRE. Structures closest to the canyon to the north and east of Altadena, together with around eight whole blocks toward the southeast of the town, between West Altadena Drive and Ventura Street, were largely destroyed.
Media reports state that more than 7,800 structures have been damaged or destroyed by the Eaton Fire, with CAL FIRE stating that the size of the Eaton Fire was 14,117 acres and as of January 15 at 8 p.m. local time, the fire was 45 percent contained.
In the USA TODAY article, parallels are being made to the devastation caused in the Paradise, Northern California fire in 2018. There are concerns about the time it takes to restore a community after a devastating wildfire, where six years on, only around a third of its previous population of 28,000 residents have returned to the town, as the pace of rebuilding averages around 500 properties per year since the fire.
The article reports that at this stage, it is difficult to know the level of insurance coverage in Altadena, and how many homeowners either don’t have insurance or are 'underinsured' – carrying policies that won’t cover the full replacement cost of their home. Of this category of property owners, Firas stated:
“They are who we call the ‘self-insured', and we see a lot of this in California. Some 963 Altadena residents had insurance through the California FAIR Plan, the 'insurer of last resort,' when private insurance was unavailable. Yet in neighboring Topanga Canyon, which is pricier and much more sparsely populated, there are nearly double the number of households using the FAIR plan."
Other experts in the article shared concerns that a shortfall in income and insurance could stymie rebuilding efforts for Altadena, and whether the rebuilding will be able to bring back the community to a level of where it was before.
Read the USA TODAY article here.
TUESDAY, JANUARY 14, 2025: 18:00 UTC
The unfolding tragedy of the current wildfires across Los Angeles County which has killed at least 24 people, and destroyed or damaged over 12,000 structures, reminds us of the overall dramatic increase in the frequency and intensity of wildfires across the U.S. and Canada over recent years, and just how the multi-faceted nature of wildfire risk has created a complex and dynamic risk landscape needing the insurance industry to re-evaluate wildfire as a primary peril.
In a new blog, Firas Saleh, director of product management at Moody's, suggests that because the factors impacting wildfires are so multifaceted, their compounding effects are exacerbated.
"No single factor is solely responsible, but when combined with the right conditions, they can lead to more extreme events. Understanding these interconnections is crucial for developing effective risk management strategies that account for the cascading effects of different perils."
He raises the concept of ‘long-term memory’ in wildfire behavior, suggesting that past weather events and climate patterns may influence future fire seasons. Antecedent conditions, such as heavy rainfall from storms and atmospheric rivers, can increase vegetation growth which then becomes fuel for wildfires during dry periods.
"Extreme storms are another important factor, for example, Tropical Storm Hilary in 2023, the first tropical storm in California since 1939, brought significant rainfall to Southern California, and led to increased vegetation growth. It was followed by the subsequent drought in 2024 that created favorable conditions for wildfires, with the increased vegetation from the storm serving as fuel."
Firas states that while it's important not to draw direct conclusions, these events highlight the complex interplay between antecedent conditions and wildfire risk, and additionally, phenomena such as La Niña and El Niño significantly influence weather patterns, including rainfall and temperature, which affect wildfire risks.
"These factors are important to examine and understand as we seek to predict and manage future wildfire events."
Read Firas's blog entitled "Los Angeles: Understanding the long-term memory of wildfires and the implications for risk modeling" here.
MONDAY, JANUARY 13, 2025: 19:00 UTC
The Moody's RMS Event Response team is supporting clients by providing regular updates on the current situation with regard to the Southern California wildfires.
In their most recent public update issued earlier today, the latest estimate from the authorities in Southern California states that over 12,300 structures have been damaged or destroyed by the wildfires in the Greater Los Angeles area of Southern California.
The Eaton Fire is estimated to have damaged or destroyed over 7,000 structures and the Palisades Fire around 5,000 structures. Damage assessments are ongoing.
Strong winds, fires, and power shutoffs caused over 1.5 million customers to lose power in Southern California since Wednesday, January 8. Three fires, including the Palisades and Eaton Fires, remain active and their perimeters are largely uncontained. As of Monday, January 13, 180,000 people remain under evacuation orders.
Dry conditions with periods of strong Santa Ana winds are forecast until Wednesday, January 15, which may exacerbate the ongoing wildfire situation and firefighting efforts.
Clients can access the Support Center for more detailed information on the wildfires, including current impacts, meteorological discussion, and fire perimeter maps.
Since Thursday, January 9, Moody's RMS Event Response has also released twice daily information updates on the ExposureIQ application on Moody's Intelligent Risk Platform for all wildfires in Ventura, Los Angeles, and Orange Counties. These updates will be available daily at 06:00 UTC and 18:00 UTC.
The fire extent accumulation information is based on the National Interagency Fire Center (NIFC) perimeters for all reported wildland fires in Southern California from Wednesday, January 1 onwards. This coverage will continue until the fires are contained.
MONDAY, JANUARY 13, 2025: 18:30 UTC
A recent Financial Times newsletter article examining the Southern California wildfires highlighted that while wildfires are not new to California, their increasing severity has placed pressure on the availability of homeowners’ insurance. A new research paper quoted in the article stated that after the devastating wildfires in California in 2017 and 2018, more than 660,000 homes did not have their insurance policies renewed in the following two years.
New legislation introduced in the state is set to help. As Firas Saleh, director of product management at Moody's shared in his recent blog, at the start of this year, the California Department of Insurance started accepting pre-application petitions from homeowners to more accurately assess their wildfire risks, and to help insurance companies offer fairer coverage plans.
Quoted in the Financial Times newsletter, Firas stated “This is a pivotal step towards fostering a more resilient community, one that is better prepared to face the escalating threats posed by wildfires,” adding that these tailored petitions will encourage homeowners “... to adopt fire-resistant building materials, create defensible spaces and implement other risk reduction measures, thereby potentially lowering their insurance costs while enhancing safety."
Read the Financial Times newsletter here.
MONDAY, JANUARY 13, 2025: 17:30 UTC
Firas Saleh, director of product management at Moody's has recently published a wide-ranging blog on the Southern California wildfires and examined the combination of factors that has tragically led to many examples of urban conflagration in the Palisades and Altadena areas of Los Angeles County.
"These wildfires exemplify the complex dynamics of wildfire risk at the wildland-urban interface (WUI) ... add in this combination of strong Santa Ana winds reaching speeds up to 80 miles per hour, gusts up to 100 miles per hour, critically low humidity, and persistent drought conditions in the region, and wildfires in Southern California such as the Palisades Fire vividly illustrate the escalating challenges of wildfire management in such vulnerable zones, and underscores the urgent need for comprehensive wildfire risk strategies."
Firas also examined the pressures the insurance industry has faced in California in providing wildfire coverage, and as private insurers have withdrawn, the state-backed California FAIR Plan has grown.
"As of September 30, 2024, California FAIR Plan exposure in Los Angeles County was US$112.2 billion with a year-over-year growth of 53 percent. Los Angeles County exposure represents approximately 23.1 percent of the entire California FAIR plan portfolio."
Read Firas's blog here.