The January 2025 wildfires in the Los Angeles area are expected to worsen California’s ongoing insurance crisis, which has affected millions of residents.
The wildfires tragically resulted in loss of life, disrupted countless people and destroyed homes and businesses. Wildfire devastation alone causes significant turmoil, but since a large percentage of Californians were not covered by insurance, this catastrophe turned into a financial crisis, too.
From 1987 to 2023, wildfires have burned an area the size of Greece in California. This amount of loss has made it difficult for insurers to operate in the state, partly because of regulations that make it difficult for companies to accurately price risk. While these laws were intended to protect consumers from rate increases, they also made it nearly impossible for insurers to remain financially viable. Between 2020 and 2023, approximately 3.6 million home insurance policies in California were not renewed. Now, more than 807,000 (or 1 in 10) California homes are uninsured.
Recent efforts by the state to reverse the regulations that contributed to the insurance crisis have come too late for the millions of California residents struggling to find coverage.
Could Canadians face a similar insurance crisis?
First, the good news. Unlike California, Canada doesn’t have the kinds of regulated pricing restrictions that resulted in a decade of financial losses for California’s home insurers and fostered market conditions that led to an insurance crisis. In fact, 1721 insurers compete for business in Canada, 101 of which offer home insurance. The competitive nature of Canada’s insurance industry helps ensure that consumers have access to the coverage that suits their needs.
However, much like California, Canada faces growing wildfire risk. The average annual insured catastrophic losses (i.e. $30 million or more) from wildfire in Canada have gone up significantly – from an annual average of $84 million between 2003 and 2014 to an annual average of $706 million in the past decade. Alberta has been particularly hard hit, experiencing more than $1 billion in insured wildfire losses in 2024, largely the result of a wildfire that destroyed over one-third of the homes and businesses in the town of Jasper. That fire is the second costliest in Canadian history, with estimates of insured losses reaching (insert latest number). The 2016 Fort McMurray wildfire remains the costliest in Canadian history, with over 2,400 homes and buildings destroyed and over $6 billion in insured damages.
Like in California, Canadian governments have not done enough to protect communities from severe weather. Current building codes do little to ensure that homes are built to withstand increasingly severe weather, and zoning by-laws continue to permit thousands of new homes to be built in high-risk hazard areas. As identified in a recent report by the Canadian Climate Institute, over the next five years, hundreds of thousands of new homes could be built in areas that are highly exposed to climate-related hazards – particularly floods and wildfires.
Further, Canadian governments’ collective investments in measures that make Canada more resilient are woefully inadequate and disproportionate to the growing impacts of severe weather events. For example, over the last 10 years, Canada’s federal government invested $41.8 billion to support emission reduction measures, which will lower Canada’s risk in 20 to 30 years. Only $4.1 billion – representing just one-tenth of the total invested in climate mitigation – was invested in measures that support reducing the risks that Canadians are already seeing today. Unless and until Canadian governments address our public policy shortcomings, policyholders will continue to feel the impacts of inadequate adaptation measures, largely through the pressure this applies on premiums. Fortunately, basic home insurance remains widely available across Canada, thanks in part to the highly competitive nature of Canada’s home insurance market and the lack of arbitrary pricing restrictions that have plagued California and other American insurance markets.
Take action now to protect your home from wildfire
Setting aside the insurance aspect, there are many steps that homeowners can take to help protect themselves and their property from the destruction that wildfire events can cause.
Regularly cut and water the grass within 10 metres of your home and the other structures on your property.
Use only fire-retardant roofing rated Class A, B or C and fire-resistant exterior siding.
Enclose the undersides of wood balconies, decks and crawlspaces with flame-resistant materials.
Store firewood and propane tanks at least 100 m from your home and the other structures on your property.
Enclose all eaves and screen all vents, including soffits.
Thin trees (with 3 to 6 m between crowns) for at least 30 m from your home.
Install spark arrestor screens on chimneys.2
The Stay Protected section of our website offers many more tips to help you safeguard yourself, your family, you’re your property from perils like flood, hail, and windstorms.
If you have questions about home, auto or business insurance, feel free to contact our Consumer Information Centre or review our various information pages in the Insurance Basics section of our site.
1MSA Research Inc.
