How the California fires could drive up homeowners insurance costs in Minnesota

A helicopter drops water on the Palisades Fire behind a home with Christmas lights in Mandeville Canyon, Friday, Jan. 10, 2025, in Los Angeles. (AP Photo/Ethan Swope)

MINNEAPOLIS (CBS)— As the Los Angeles area continues to burn, it’s becoming clear: the Palisades Fire could become the costliest wildfire in history.

Not just because of how many homes have been destroyed, but because they’re some of the nation’s most expensive homes, with a median value of $3.1 million.

Insurance claims are skyrocketing there.

But what does that mean for your homeowners insurance costs here in Minnesota?

“There’s not a linear connection between the losses that are being suffered in California and what Minnesota insurance consumers pay,” Insurance Federation of Minnesota President Aaron Cocking said. “There’s some indirect possibilities in which we could face pressure on rates in Minnesota.

Here’s how it works: When there’s a catastrophe like this, insurance companies file a claim with their insurance company. They’re called re-insurers.

That move is going to tighten the insurance market in general and that means everyone’s rates could go up.

Here’s the other hit that’s coming: Cocking said the cost of building materials is about to go up.

There just aren’t enough shingles and lumber out there to cover this massive rebuild of California homes, on top of normal demand and ongoing rebuilds from hurricanes and other natural disasters.

So Cocking said the cost to replace homes will go up. Subsequently, insurance will have to charge you more because it would cost them more to rebuild your house if they had to.

CBS News reports 1,600 policies in Pacific Palisades, California were dropped by State Farm in July and another 2,000 in other L.A. zip codes recently.

Cocking said that’s not happening in Minnesota. But hail is a huge issue here — it’s very costly for insurers.

He said bottom line: Insurance companies need to charge premiums to cover their losses and stay in the market.

As far as when you could see your costs go up in Minnesota? Cocking said there’s lag time — it could be months or even years.