Global insured losses from natural catastrophes reached an estimated $80 billion in the first half of 2025, according to the Swiss Re Institute, the second-highest first-half total on record. The figure was published on 6 August.
The January wildfires in Los Angeles County, the Palisades and Eaton fires, caused about $40 billion in insured losses, according to Swiss Re, half of the global first-half total. That makes them the largest insured wildfire loss event on record. Severe thunderstorms, mostly in the United States, added a further $31 billion.
Above trend
Swiss Re's earlier sigma report, published in April, estimated that insured losses had been growing at 5% to 7% a year in real terms and that, if the trend held, full-year 2025 losses would approach $145 billion. The first-half figure is well above a typical first half under that trend, largely because of the Los Angeles fires. Swiss Re describes the first-half losses as above trend.
The second half of the year includes the peak of the North Atlantic hurricane season, which has historically produced the largest single-event losses. Whether 2025 ends as an above-trend year or a peak loss year will depend largely on hurricane activity between August and October.
Why the Los Angeles fires were so costly
The fires spread through densely built, high-value neighbourhoods in Pacific Palisades and Altadena under extreme Santa Ana winds in January, outside the traditional fire season. The number of structures destroyed, the value of the homes and the cost of rebuilding in California combined to produce exceptionally high insured losses.
Swiss Re has highlighted three factors that drive wildfire losses higher over time: growth in the number and value of properties in fire-prone areas, sometimes called the wildland-urban interface; rising construction and labour costs; and climate conditions that extend fire seasons and dry out vegetation. In Los Angeles, a very wet two winters followed by an extremely dry autumn and winter left abundant dry vegetation when the winds arrived.
The utility connection
Utilities are directly exposed to wildfire losses when their equipment is involved in an ignition. In the Eaton fire, investigations are examining whether Southern California Edison equipment played a role, and the utility has said its equipment may have been associated with the ignition. Insurers who pay claims to policyholders can pursue recovery from a utility through subrogation, which means a large share of insured losses can eventually become claims against the utility.
California's Wildfire Fund, created in 2019, can reimburse eligible utilities for claims above a threshold. The size of the Los Angeles losses has raised questions about whether the fund is large enough, and the California legislature is considering measures to replenish or extend it.
For utility investors, wildfire liability has become one of the main credit risks for companies in the western United States. Rating agencies have cited it in downgrades and outlooks, and the cost of equity for exposed utilities has risen.
Severe convective storms
The $31 billion from severe thunderstorms in the first half continues a pattern in which these storms, which bring hail, tornadoes and damaging straight-line winds, produce large cumulative losses each year. They are particularly significant for property insurance in the central and southern United States.
For energy infrastructure, hail is a major cause of damage to solar farms in Texas and other central states, and severe storms regularly cause distribution outages. Insurance premiums and deductibles for utility-scale solar in hail-prone areas have risen as a result, affecting project financing costs.
Shut-offs as a risk tool
One response by utilities to wildfire liability has been the public safety power shutoff, in which a utility de-energises lines in high-risk areas during extreme wind and dry conditions. California's large utilities have used shutoffs since 2019, and utilities in Oregon, Nevada, Idaho and other western states have adopted them. Shutoffs reduce ignition risk but leave customers without power, sometimes for days, and they carry their own safety risks for people who depend on electricity for medical equipment, water pumping or cooling.
The Eaton fire has put a spotlight on how utilities decide which circuits to switch off. Regulators and lawmakers are examining whether shutoff criteria should be tightened or made more transparent, and how utilities balance the risk of ignition against the harm of prolonged outages. The answers will shape both utility operations and the frequency of outages that customers in fire-prone areas experience.
Longer term, utilities are investing in covered conductors, undergrounding in the highest-risk areas, fast-acting protection settings that cut power within milliseconds of a fault, and networks of weather stations and cameras. These programmes are costly, and their costs are recovered through rates, which adds to affordability pressure in states where bills are already high.
Insurance market conditions
Despite high losses, Swiss Re and other reinsurers have reported that reinsurance capacity remains ample. Reinsurers raised prices and tightened terms after the heavy loss years of 2017 to 2023, and capital has grown.
At the primary level, homeowners in California, Florida and other high-risk areas continue to face reduced availability of coverage, with several large insurers limiting new policies. California's insurance regulator has introduced reforms aimed at bringing insurers back to the market, including allowing the use of catastrophe models in rate setting and the cost of reinsurance in premiums.
What it means for energy companies
Energy companies face higher insurance costs and tighter terms where catastrophe exposure is high. That applies to Gulf Coast refineries and LNG terminals exposed to hurricanes, to utilities in wildfire-prone regions, and to renewable projects in hail and storm zones. These costs are passed through to customers in regulated businesses and affect margins and financing in competitive ones.
The first-half figures also show how a single event can dominate annual losses. For utilities, a single catastrophic fire linked to their equipment can exceed their insurance cover and threaten their financial position, which is why state-level backstop mechanisms have become central to utility credit quality.
What to watch
The hurricane season through October will determine the full-year total. In California, legislative action on the Wildfire Fund before the end of the session in September is the key development for utilities. Swiss Re's full-year sigma report, due in early 2026, will provide final figures.