One year after the 2025 Los Angeles Fires: What has changed, what have we learned, and what actions must still happen?

The month of January 2025 will be remembered as the time when urban wildfire became a U.S. catastrophe class of its own.

Just seven days into 2025, a cluster of fires, anchored by the Palisades and Eaton events, and driven by severe Santa Ana winds, flash‑drought conditions, and dense wildland-urban interface (WUI) exposure, spread across Greater Los Angeles and adjacent counties. These fires forced mass evacuations—and reshaped the risk and insurance landscape.

 

What happened and what was unique about this event?

Between January 7 and 31, 2025, fourteen or more destructive fires affected Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura Counties.

Weather agencies had warned about the underlying wildfire risk drivers: hurricane-force Santa Ana winds, extremely low humidity, and a dry start to the wet season after vegetation build-up in prior wet years.

By the end of January 2025, the Palisades Fire (~23,448 acres) and the Eaton Fire (~14,021 acres) had emerged as one of the most destructive in U.S. history, with over 18,000 structures destroyed or damaged and total evacuations exceeding 200,000 people.

Tragically, as many as 32 fatalities were officially reported as a direct result of the fires, and subsequent analyses have attributed excess mortality of up to 440 people due to smoke-related health impacts.

 

Kickstarting the recovery

One year on, insured losses from the LA fires remain in the US$25–$30 billion range, largely driven by the Palisades and Eaton events. While most claims have progressed, the cause of the loss from the Eaton Fire is under investigation, leaving open questions around subrogation.

Identifying the cause of ignition for the Eaton Fire and the role of the utility companies is central to how wildfire losses are ultimately distributed and resolved from the private insurance market perspective.

In the aftermath of the Eaton Fire, utility Southern California Edison (SCE), which supplies power to approximately 15 million people in the impacted counties, established the Wildfire Recovery Compensation Program.

Launched in November 2025, the program looks to provide fair and prompt compensation for property damage, business losses, physical injuries, and fatalities resulting from the Eaton Fire. The program is voluntary, allowing claimants to retain all legal rights until a settlement is accepted.

Compensation from the program covers economic and non-economic losses, with standardized premiums and attorney fees included for represented claimants. Importantly, the program is structured to minimize delays and uncertainty, aiming to resolve claims outside of litigation while maintaining equity and transparency for all affected parties.

SCE’s compensation program is backed by a US$1 billion ratepayer-funded insurance pool; if claims exceed this amount, SCE will seek reimbursement through California’s Wildfire Fund, which was expanded by US$18 billion in late 2025. This fund, originally financed by the state, together with equity and shareholder earnings from utility companies, now allows SCE to shift substantial Eaton Fire costs to customers under new legislation.

The program’s design ensures that eligible claimants, including property owners, tenants, businesses, and injury victims, receive compensation based on consistent formulae, even as insurance offsets and subrogation options remain active, while the cause of loss investigation for the Eaton Fire continues.

The evolving utility liability framework and compensation mechanisms will have lasting impacts on recovery timelines, litigation strategies, and the broader financial landscape for wildfire risk in California.

 

Why so much burned: Lessons from urban conflagration

After the fires, the Moody’s team conducted extensive reconnaissance to understand how factors, including connective fuels, older construction practices such as the installation of single-pane windows, ember pathways, and structure-to-structure spread under high winds, had driven the severity of urban losses.

Early insights from the Insurance Institute for Business & Home Safety (IBHS) describe a textbook worst-case coupling of wind vectors and street orientation, turning neighborhoods into fuel rather than breaks.

Detailed lessons from California’s research networks emphasize the use of dual-pane tempered glass, noncombustible siding, and the implementation of the California Board of Forestry and Fire Protection's 'Zone Zero' regulation (a five-foot-wide noncombustible perimeter) as decisive mitigations when radiant heat and embers dominate.

 

Policy and regulatory shifts: A year of transformation

The aftermath of the Los Angeles fires marked a turning point in California’s approach to wildfire risk and insurance regulation. For the first time, the California Department of Insurance (CDI) conducted a PRID (Pre-Application Required Information Determination Procedure) review, evaluating forward-looking wildfire catastrophe models for use in rate filings. This process enables regulators to assess the credibility and accuracy of advanced models, ensuring that insurance pricing reflects both current and future wildfire risk.

Moody’s RMS™ U.S. Wildfire HD Version 2.0 model completed the PRID review for residential ratemaking in August 2025, allowing insurers to incorporate mitigation measures—such as home hardening and community resilience—and complex urban fire spread scenarios into their risk assessments. By aligning with California Code Regulations CCR §2644.9 issued in 2021, the model supports more accurate pricing and incentivizes investments in resilience at both the household and community levels.

Legislative action followed swiftly. Lawmakers advanced a package of measures to expand hardening grants, reduce post-disaster claim friction, and extend moratoria protections for affected policyholders. These reforms are part of a broader strategy to close the protection gap that widened further in the wake of the LA fires, ensuring that more Californians have access to affordable coverage and that recovery is both equitable and efficient.

The Moody’s RMS U.S. Wildfire HD Version 2.0 model was also certified by the Nevada Department of Insurance, expanding regulatory acceptance beyond California.

 

Modeling advances and data—and why they matter now

The 2025 Los Angeles fires underscored the need for more sophisticated wildfire modeling. Moody’s RMS U.S. Wildfire HD Version 2.0 model was designed to address these challenges exactly, integrating explicit ember and urban-conflagration modeling to capture how fires spread in densely built environments.

This approach goes beyond traditional vegetative fuel perimeter-based models to account for the role of wind-driven embers, structure-to-structure ignition, and the unique vulnerabilities of the wildland-urban interface.

A key innovation in our model is the explicit representation of mitigation measures such as home hardening, defensible space, and community-level mitigation efforts that directly influence loss outcomes. The model also incorporates policy-term nuances, including limit extensions, ordinance and law coverage, and inflation guard, which are critical for accurately estimating insured losses and guiding rate filings.

By aligning with regulatory requirements and supporting transparent, science-based pricing, Moody’s RMS U.S. Wildfire HD model empowers insurers and policymakers to anticipate risk more effectively, reward mitigation, and close the protection gap.

In the wake of the LA fires, these advances are not just technical achievements; they are essential tools for building a more resilient future.

 

Parting thoughts

The 2025 Los Angeles fires have highlighted several systemic challenges: high-density exposure within the wildland–urban interface, rising impact of a changing climate, infrastructure vulnerabilities, and the complexities of post‑disaster recovery.

There has been significant progress over the past year as regulatory frameworks evolved to incorporate forward‑looking models, mitigation programs expanded, and insurers adjusted underwriting practices to reflect urban conflagration risk.

Data from field assessments, health studies, and economic analyses confirm that wildfire impacts extend beyond property loss to public health, community stability, and market resilience. Continued progress depends on scaling hardening measures, improving lifeline reliability, and embedding transparent recovery governance.

These developments underscore the importance of integrated risk management, combining science and operational readiness to reduce future loss severity and accelerate recovery timelines.

If the LA fires taught us anything, it is that both risk and resilience evolve, and effective mitigation depends on sustained, coordinated action.