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California Adds More ZIP Codes to Insurance-Cancellation Ban

Patrick Douville, vice president of Global Insurance & Pension Ratings at Morningstar DBRS, says the damage from wildfires ravaging across Los Angeles is estima

(Bloomberg) -- California sought to protect more Los Angeles-area homeowners from potentially losing their home-insurance policies as wildfires continued to ravage the region.

State Insurance Commissioner Ricardo Lara amended last week’s mandatory moratorium on cancellations and non-renewals of residential insurance policies to include neighborhoods affected by the Hurst, Lidia, Sunset and Woodley fires. 

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The updated regulatory bulletin also adds ZIP codes that were impacted by the Palisades and Eaton fires, which on Wednesday were 19% and 45% contained, respectively, according to the state Department of Forestry and Fire Protection.

More than a week after the fires began, Los Angeles and neighboring Ventura County are bracing for “extreme fire danger” through at least Wednesday afternoon. Conditions may improve somewhat on Thursday as winds begin to shift, according to a National Weather Service forecast.

Potential losses for insurers from the California fires are expected to reach as high as $40 billion, Keefe Bruyette & Woods said Tuesday in a note to clients. 

In recent years, insurers have been pulling back from the most populous US state, blaming the rising cost of natural catastrophes and stringent pricing regulations. This prompted homeowners to flock to California’s FAIR Plan, its insurer of last-resort, whose president said last year that it wasn’t financially prepared to cover the costs of a major catastrophe.

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