The Los Angeles wildfires are set to be the costliest blaze in U.S. history.

The human cost in terms of loss and suffering is incalculable and is what’s most important.

And, as crews attempt to gain control over the fires, the estimated total insured losses are going to be in the tens of billions.

For comparison, the final tally on insurance losses from the August 2023 Lahaina, Maui, fire was pegged at $4.4 billion and the insurance losses from the August 2020 CZU Fires in our county was $3 billion. The 2018 Camp Fire in Northern California’s Butte County, the nation’s most destructive wildfire through last year, inflicted insured losses of around $12.5 billion.

The final tally of insurance losses from natural disasters can vary markedly from initial estimates, particularly for forecasts made while events are still unfolding, but the damages from the LA fires could topple the state’s undercapitalized insurer of last resort, FAIR. In addition, private carriers are certain to increase premiums, cancel policies or withdraw from California — a familiar scenario for many Santa Cruz County homeowners post-CZU.

Whatever the ultimate total is for the LA fires, there’s no question that more multibillion-dollar losses could put significant pressure on California’s already fragile home-insurance market.

Late last week, Ricardo Lara, the state’s insurance commissioner, issued a one-year moratorium to prevent insurance providers from canceling or not renewing their policies on homes in the most affected areas. He also called on providers to halt any pending non-renewals or cancellations over the last 90 days.

Still, insurers had already scrapped hundreds of thousands of policies and limited coverage in wildfire-prone areas (again, just what has happened in Santa Cruz County). That’s because California was the only state not allowing insurers to incorporate the cost of reinsurance in premiums. Until this year, it had also prohibited insurers from adjusting premiums by using the standard industry practice of catastrophe modeling to predict a property’s future risk. Insurers could only assess premiums based on historical losses. As a result, insurers are paying out $1.09 in expenses and claims for every $1 they collect in premiums. This is financially unsustainable, which is why many have pared coverage in areas at high fire risk with expensive homes.

To keep carriers from fleeing the market following almost a decade of increasingly destructive, climate-driven wildfire seasons, Lara last month said at long last that they could use catastrophe modeling and price in their reinsurance costs. But with the changes yet to take full effect, experts say the billions of dollars in expected new insurance claims in Southern California could translate to fewer coverage options and fewer policies written for homeowners in our area as well.

FAIR now covers about half a million homeowners who can’t obtain private coverage. Its exposure has ballooned to $458 billion as of last September from $153 billion four years earlier. Yet it has only about $700 million cash on hand to pay claims and may be headed toward insolvency.

FAIR President Victoria Roach testified to the State Assembly last year about the insurer’s precarious finances. “As those numbers climb, our financial stability becomes more in question,” she said. “We are one event away from a large assessment. There’s no other way to say it, because we don’t have the money on hand, and we have a lot of exposure out there.”

Many who lost homes in the L.A. infernos were likely on the plan. According to our Bay Area News Group analysis of FAIR Plan data, there are more than 26,000 FAIR Plan properties in ZIP codes impacted by the fires across Los Angeles County.

If FAIR fails, private insurers — meaning their policy holders — are supposed to cover its claims based on their share of the market.

But insurance premiums for many homeowners are set to rise 20% to 40% this year and even more in the future, and that was before the current fires. Not only could existing homeowners continue to see rate hikes and lose coverage, but families that struggle to find insurance may not be able to take out a mortgage to buy a home. In areas at extreme fire risk, including the Santa Cruz Mountains, fewer buyers could mean falling home prices, straining local tax bases and California’s overall economy. A shrinking insurance market will leave many L.A.-area residents dependent on federal programs, charitable aid and their own savings to rebuild their lives.

All of which explains why Gov. Gavin Newsom inevitably will ask Washington to help pay for multimillion-dollar homes that have gone up in smoke.