Los Angeles wildfire insured losses are expected to range from $US20-$US$30 billion ($32-$48 billion), with reinsurers picking up part of the tab, Gallagher Re says.

The total, which remains a preliminary estimate as damage assessments continue, includes losses incurred by the private market and California’s last resort FAIR Plan.

The scale of damage to high-value properties and other expensive assets suggests it is on track to become the costliest series of fires for the insurance industry.

“The anticipated portion ceded to reinsurance may reach the mid to high single digit billions,” Gallagher Re says.

“However, this is not expected to meaningfully erode capital and should be manageable for reinsurers.”

Most of the losses are expected to stem from the Palisades fire, which is 27% contained, and the Eaton fire, which is 55% contained, according to the California Department of Forestry and Fire Protection. At least 27 people have died in the fires, which have destroyed thousands of properties.  

Gallagher Re says background reasons for the disaster include population and exposure growth in the wildland-urban interface, many communities lacking fire-resistant construction or mitigation, drought, and increasingly volatile weather and climate conditions linked to a warming atmosphere. 

The event is putting the spotlight on increasing insurance premiums and affordability and availability problems in Australia following the fires and floods of the past five years.

Independent federal MP Zali Steggall says extreme weather is becoming more frequent and severe and “Australians are already paying for climate impacts, especially with their ever-increasing” premiums.

“We cannot insure our way out of the climate crisis,” she said. “Governments must prioritise preparation, adaptation and mitigation by rapidly decreasing emissions.”

Independent economist and Climate Council councillor Nicki Hutley says California has shown that trying to cap premium increases, or asking the public sector to step in, is not a permanent solution and there must be more investment in adaptation and resilience.

“We have built our homes in far too many vulnerable places. We cannot afford to repeat these errors of the past,” she writes on The Guardian Australia website. “Governments have committed to providing better data to inform developers and would-be residents, and this needs to be done with urgency.”