Los Angeles, CA – Allstate Insurance announced that it expects to pay out $1.1 billion in claims due to the devastating wildfires that swept through Southern California in January. Despite the significant loss, the company noted that it has mitigated its exposure by reducing its footprint in California, where rising wildfire risks have led multiple insurers to cancel homeowners’ policies.
The total industry-wide insurance claims from the fires are estimated to range between $35 billion and $45 billion, covering approximately 16,600 affected properties, according to catastrophe research firm CoreLogic.
Allstate disclosed the claims figure alongside its fourth-quarter earnings report. While the wildfire losses were not included in those results, the company posted a $2.1 billion profit for the quarter, marking a 34% increase from the previous year. Its adjusted profit for 2024 reached $4.9 billion, despite incurring $315 million in catastrophe claims from Hurricane Milton and re-evaluated costs for Hurricane Helene.
California Homeowners Face Insurance Rate Hikes
The wildfire devastation is expected to drive up homeowners’ insurance premiums throughout California. Earlier this week, State Farm, the state’s largest insurance provider, requested an emergency interim rate increase averaging 22%, citing financial strain from the fires. The company has already received over 8,700 claims and paid more than $1 billion in settlements, with more costs expected.
The California FAIR Plan, the state-backed insurer of last resort for homeowners who cannot secure coverage through traditional insurers, is also expected to experience significant claims. To cover its obligations, it may levy an assessment on other insurers, a cost that could be passed down to consumers.
Insurers can now also factor the cost of reinsurance—insurance that companies buy to protect themselves from major losses—into their rate calculations. Previously, reinsurance costs were excluded from such considerations, but increasing financial pressures have led to regulatory changes allowing these expenses to influence premium rates.
With wildfire risks continuing to rise, California’s insurance market faces mounting instability, leaving homeowners with fewer and costlier coverage options.
