The LA fires are deepening a home insurance crisis in California

The uncontrolled fires in LA have destroyed entire neighborhoods and left historic damage, but they have also deepened a home insurance crisis in California.

According to AP News, until Jan. 12, the fires have killed 24, 16 are missing, and thousands of homes were destroyed. The heavy winds accelerated the flames.

Still, the fires have also caused historic economic losses. According to the Wall Street Journal, the fires destroyed many high-value homes— some of the most expensive in America.

The newspaper reported that industry officials warned of widespread economic damage comparable to some of the biggest recent fire disasters. The news came as California was experiencing an insurance crisis.

Since 2022, major insurance companies have retreated from California, leaving thousands of homeowners scrambling for protection in a constricted market.

According to Fox News, Allstate and State Farm, the largest home insurer in America, left in 2022. Tokyo Marine, and Trans-Pacific, under the same parent corporation, followed.

According to CNBC, the leading reason insurance companies left California was wildfires, but they also cited inflation and high construction costs to justify reducing their coverage.

CNBC cited experts who said the insurance landscape is tricky in California due to regulations that require extra approval from the local authority when a company wants to raise rates above 7%.

Michael Soller, a spokesperson for the state Department of Insurance, told The LA Times that California's situation is now "a tale of two states."

Soller explained that a person in the San Fernando Valley could easily insure their home with many options and prices, while someone in a neighborhood close to nature would have fewer options at higher prices.

"The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires," Allstate said in a statement collected by AP News.

Insurance companies are not only pulling from California, though. According to CNBC, the issue also affects other states, with several areas prone to natural disasters.

The outlet cited the cases of Florida and Louisiana, which have high flood and hurricane risks. In 2022, global insured losses from natural disasters topped $130 billion.

CNBC cited experts who said the ripple effect could continue nationwide as climate change intensifies natural disasters and makes them more frequent.