The wildfires that destroyed homes in multiple sections of the Los Angeles area will test California’s efforts to stabilize the state’s insurance marketplace after many insurers stopped issuing residential policies due to the high fire risk.

Industry officials warn of widespread economic damage on par with some of the biggest fire disasters in recent memory.

The state’s insurance industry was reformed in late 2024 to promote coverage in disaster-prone areas. Tens of billions in fire damage will stress-test the new regime.