What LA fires mean for your home insurance

The Los Angeles wildfires will push up the already skyrocketing cost of home and contents insurance in Australia, experts predict.

The Los Angeles fires will drive up the already skyrocketing cost of home and contents insurance policies in Australia because of the global nature of the industry, experts believe.

According to the latest Australian Competition and Consumer Commission report, the median cost of home and contents insurance shot up 13 per cent in southern Australia in 2023, and 11 per cent in Far North Queensland and the Northern Territory off an already-higher base.

But those costs could rise even higher, with estimates that insured losses from the LA fires could be as high as US$20 billion (A$32.5 bn).

Andrew Gissing, the CEO of the consultancy Natural Hazards Research Australia, said insurance was a “global market” and losses are shared globally.

“When big events happen in the US, those losses have global ramifications in pricing. We will see some ramifications in pricing in Australia” he said.

In this aerial view taken from a helicopter, homes burned from the Palisade fire smoulder near the Pacific Palisades neighbourhood of Los Angeles. Pictures: Josh Edelson/AFP

Similar comments came from Scott Hawkins, managing director of reinsurance provider Munich Re Australasia, who told the industry publication Insurance Business that “Where losses exceed premium both due to actual experience as well as new information, suggesting that future losses will remain at a higher level, then prices will increase in both primary and reinsurance.”

Alix Pearce, General Manager for Climate Social Policy and International Engagement at the Insurance Council of Australia, said the LA fires are “a reminder that extreme weather events are worsening, including lengthening bushfire seasons, with implications for the affordability and availability of insurance.”

Risk and resilience expert Andrew Gissing. Picture: Supplied

Ms Pearce said it was too early to predict what the implications of the LA fires would be on the cost of local premiums, but they had occurred “in the context of a global reinsurance industry that has already been stressed by increasing extreme weather and inflation”.

Global reinsurers had failed to earn their cost of capital in five of the last six years, and Australian insurers faced reinsurance cost increases of up to 30 per cent last year, Ms Pearce said.

“Although conditions are expected to soften in 2025, current reinsurance cost rises are still flowing through to Australian policyholders,” she said.

Insurance is set to become a hot-button topic in the wake of the LA fires, given 12,000 structures have been damaged or destroyed in just four days. By comparison, just over 3000 structures were lost in Australia’s Black Summer.

On Friday, California Insurance Commissioner Ricardo Lara called on the industry to honour policies that had lapsed in the 90-day period before the fires.

“If you received a non-renewal from your homeowner’s insurance between October 9 and January 7 … your insurance company should do the right thing and retain you as a valued policyholder,” Mr Lara said.

Originally published as What LA fires mean for your home insurance