Altadena has avoided California’s fire insurance hell. That won’t last.
Randy and Miki Quinton held hands as they walked uphill into what remains of their neighborhood in Altadena, the unincorporated Los Angeles suburb where they had lived for more than 20 years. After they entered the barricaded neighborhood through an open alleyway with two of their friends on Friday, the husband and wife confronted a scene of utter devastation: The Eaton Fire had incinerated hundreds of homes and cars in the middle-class neighborhood, leaving behind only ash-soaked chimneys and flaming gas lines. The Quintons’ own house had been vaporized, along with all their belongings.
“Twenty-four, forty-eight hours, and it’s all gone,” Randy told Grist.
The Quintons and thousands of other families now confront a living nightmare as they begin to recover from the most devastating wildfire outbreak in modern U.S. history. The Eaton Fire and the Palisades Fire, which overwhelmed coastal neighborhoods about 30 miles away, have together killed at least 24 people and destroyed well over 10,000 structures.
How the victims rebuild their lives will now depend largely on California’s beleaguered home insurance market. Unlike many fire victims in other parts of the L.A. area, the Quintons and many of their neighbors had been able to maintain their insurance policies in the leadup to the fire, even as companies dropped thousands of other fire-prone customers across California and in other states across the country.
.“We’re blessed in that regard,” said Quinton.
The coverage may bode well for the recovery of the diverse neighborhood, which was home to many long-tenured Black families who have owned property in Altadena since the Civil Rights Era. That stability may not last, however, as California’s insurance market continues to contract following the fires, which have caused more than $20 billion in insured losses, according to preliminary estimates. Insurance companies will almost certainly have to raise prices and drop risky customers to make up for billions of dollars in payouts on high-value L.A. homes. While the availability of insurance in recent years may help displaced Altadena residents return, they will be coming back to a neighborhood that will likely be far less affordable than it once was. In a county where the median home price is around $900,000, that leaves the future uncertain for many longtime Angelenos.
Despite the fact that Altadena sits within the “wildland-urban interface” — the area where housing development pushes up against the fire-prone hills — Altadena’s affected neighborhoods do not appear on a list of “distressed areas” that the state insurance commissioner published last year. The average premiums in the neighborhood were around $2,300 a year, well below those of other fire-prone areas in the north of the state, and fewer than 10 percent of people in the areas that burned got their coverage through the state-backed insurer of last resort, though that number has been ticking up in recent years.
“Without [insurance] we’d be lost, it’d be over,” said Kevin Devine, a security guard and lifelong Altadena resident who also lost his house in the fires. “We’ve been here all our life, and I think we’re going to be able to come back stronger. We’re not going to let a fire stop us.”
Devine grew up in the house, which his mother bought almost half a century ago. He returned to the neighborhood last week to examine the wreckage of his home with his son and his twin brother Keith, who is also a security guard. His sister lived up the road and lost her home as well, but Kevin said the siblings could stay with family members in a nearby suburb while they waited to rebuild their homes.
The insurance situation is much different in wealthy Pacific Palisades, where another massive wildfire still raged early this week. Even before the fire, most homeowners in the Palisades and on the shoreline near Malibu could no longer secure traditional insurance coverage, which meant they had to rely on the California FAIR Plan, the state-backed insurer of last resort. Even that was not enough to cover many homes: The FAIR plan only covers damages up to $3 million, and many homes in Pacific Palisades are worth far more than that. People in those homes often secured coverage through so-called surplus lines insurers that charge premiums that run in the tens of thousands of dollars per year.
Altadena has not yet experienced issues like these, but that might not last. California prohibits insurance companies from dropping customers in fire-struck areas for at least a year, but customers might be issued non-renewals as soon as that moratorium expires. In the meantime, insurance companies might stop writing new policies for people who move into the neighborhood. California also just finalized rules that will allow insurers to increase prices further and faster. (Insurance companies say these increases are necessary to account for climate change and inflation.)
The impact of the loss in the wealthy Palisades will also be felt in more modest Altadena as insurers pay out billions of dollars in claims on high-value homes. The FAIR plan has a stunning $24 billion of exposure in the area affected by the fires, and paying out those claims over the coming years would wipe out its existing reserves. Once the program runs out of money, it will impose an assessment on insurance companies according to their market share in the state, who can then pass the costs of that assessment to their customers, including those in less vulnerable areas.
This all means that Altadena may soon experience both a rise in insurance prices and gaps in coverage, which will raise pressure on homeowners as they return — and may weigh on the value of their homes.
“I don’t expect an insurance market collapse,” said Nancy Watkins, a principal actuary at Milliman, a leading risk analysis firm. However, she added, “I think prices may be depressed by insurance premiums going up, and people being potentially more fearful of living in California.”
There is one way to mitigate this price pressure: If Altadena rebuilds in a manner that is more resilient to wildfires, using fire-resistant home materials for new construction and carving out a buffer between the city and the fire-prone mountains nearby, insurance companies would be required under California law to offer future residents discounts on their premiums. The town of Paradise mandated such construction after the 2018 Camp Fire destroyed thousands of homes there. Insurance companies have finally started offering policies in Paradise again in recent months.
It will be up to the government of Los Angeles County, which has jurisdiction over unincorporated Altadena, to decide on the standards for the town’s rebuild.
Nic Arnzen, a member of Altadena’s town council who lost his home in the fire, said that he believed the county needed tougher standards for fire-safe construction.
“The county has been working on that,” he told Grist. “They are not sufficient at this point, and as a town, we will use our strength to be sure that our town is safe.” However, he also added that residents are anxious to protect the neighborhood’s architectural history and said he hoped the county government would offer residents flexibility as they secured permits to rebuild.
“We have been assured that they will lift some certain restrictions and make the process easier,” he said. Many older homes in the neighborhood that were destroyed in the fire would be too large to rebuild under current codes.
When it comes to the town’s proximity to the fire-prone San Gabriel Mountains, Arnzen said Altadena was the victim of poor timing. The town council had just helped the county approve a long-term plan to gradually reduce housing density in the most dangerous foothills of the town. It was scheduled to go into effect this year and might have minimized some of the damage from the fire.
“We were already on that, but we missed it by a year,” he said.