Climate Change Is Reshaping Insurance—And It’s Costing Billions
Diary, 10 March, 2025
The devastating Eaton and Palisades wildfires that swept through Los Angeles in early 2025 represent a complex intersection of natural fire ecology and human-induced climate change. Scientific analyses have confirmed that climate change made these catastrophic fires approximately 35 percent more likely than they would have been in the pre-industrial era.
The fires left behind a trail of devastation—29 lives lost, more than 16,000 buildings turned to ashes, and over 37,000 acres of land charred beyond recognition. But in the midst of this destruction, something curious happened.
Lloyds of London, the world’s oldest insurance market, braced for a $2.3 billion wildfire-related payout. But there was a twist. Despite the widespread destruction, one category of high-value assets remained curiously unscathed: fine art. The reason? The wealthy didn’t leave their treasures behind—they packed them up and fled.
Despite this small reprieve, the broader insurance industry was not so lucky. Across the globe, insurers were staring at up to $40 billion in wildfire-related losses. Climate disasters are no longer outliers; they are the financial system’s new normal. According to the National Oceanic and Atmospheric Administration, the same agency that the Trump administration seeks to undermine, billion-dollar disasters in the U.S. have skyrocketed from an average of three per year in the 1980s to a staggering 27 in 2024. The cost? A mind-numbing $182.7 billion last year alone.
For Lloyd’s, the fallout from these catastrophes was already visible. Pre-tax profits took a 10% hit, and while gross written premiums rose 6.5% to £55.5 billion, largely due to property and reinsurance, the trend was clear: insurers are writing bigger checks, faster, than ever before.
But beyond the numbers, the California wildfires told a more profound story. Money can buy you an escape plan—but even the wealthiest can’t outrun the flames of climate change forever.
Notes:
Lloyd’s of London forecasts $2.3bn losses from LA wildfires - Financial Times
Lloyd’s of London expects $2.3bn losses from California wildfires | Lloyd's | The Guardian