UCLA Anderson Forecast on Cost of Fires

From "Economic Impact of the Los Angeles Wildfires," by Zhiyun Li and William Yu. 

Summary: The estimated economic impact of L.A. wildfires in January 2025 is as follows. It is important to note that these estimates are preliminary, based on various assumptions, and may be updated:

(1) Total property and capital losses could range between $95 billion and $164 billion, with insured losses estimated at $75 billion. 

(2) A reduction of GDP by $4.6 billion, a 0.48% decline in GDP, with a loss of wages of local business and employees totaling $297 million in 2025. 

(3) Without significant and effective wildfire mitigation actions and investments, all California residents will face continued increases in insurance premiums and growing health concerns.

(4) L.A. housing markets, in particular for rental units, will become increasingly unaffordable. 

(5) Local governments are likely to increase spending post-wildfires.

In addition to significant economic losses, the toll of human life by wildfires has not been fully accounted for. To combat the escalating risks posed by climate change, California's foremost priority should be to invest comprehensively in wildfire mitigation strategies. These include advancing firefighting techniques, adopting technology such as AI and drones for detecting and extinguishing wildfires, managing forests and brush, upgrading utilities infrastructure, controlling homeless encampment, rethinking water resource management, strengthening building codes, and subsidizing home hardening. We suggest that all adaptation and mitigation investments will be justified, considering the astronomical costs associated with wildfires.

For example, California’s 2008 regulations on building codes require buildings in fire-prone regions to be designed to reduce wildfire risks. ...(H)omes built post-2008 are less likely to be destroyed during a wildfire.  However, much of L.A.'s housing stock predates these regulations, leaving many homes vulnerable to ignition. California has launched a grant program to support home hardening in several counties, but given the vast number of homes needing upgrades, it is imperative to expand strategic local and state grant programs targeted at homeowners below a certain income level to effectively meet this demand. In addition, insurers can play a crucial role in wildfire risk mitigation. By offering financial incentives, such as discounts to homeowners who install safety features like sprinklers, insurers can decrease the likelihood of homes being destroyed in wildfires and reduce the number of insurance claims following such incidents.

Full report at https://www.anderson.ucla.edu/about/centers/ucla-anderson-forecast/economic-impact-los-angeles-wildfires#15.