January’s California wildfires have caused staggering losses, with billions of dollars in damages to homes, businesses and infrastructure. According to the California Department of Forestry and Fire Protection, more than 37,000 acres burned in the Palisades and Eaton fires.
Insurance will play a key part in the rebuilding process.
The wildfires join a growing list of catastrophic events in recent years that continue to challenge the insurance market. While Kentucky is thousands of miles away, these disasters can still affect residents through rising insurance premiums and shifting market dynamics.
The state of the insurance market
Following the devastation caused by Hurricanes Harvey, Irma, and Maria in 2017, the property insurance market has faced ongoing challenges. Inflation has driven up costs and led to higher values on insured properties.
Each year since 2017, the U.S. has experienced at least 15 weather events with damages exceeding $1 billion each, affecting the market’s overall profitability. In 2024, there were 27 billion-dollar weather and climate disasters in the U.S., according to the National Centers for Environmental Information. 
“These events have become more common, and the repair cost in their wake has grown,” said Kristi Whistle, Managing Director for insurance broker Marsh. “To account for these changes, alongside inflation and increased costs of non-weather events, the insurance market has restricted terms and pushed rates.”
How california wildfires affect Kentucky policyholders
A wildfire in California or a hurricane in Florida is unlikely to impact Kentucky directly, but insurance companies covering both states feel the financial burden.
When insurers absorb significant losses from California wildfires, they often adjust rates across their entire portfolio—including Kentucky—to recoup their costs.
“This is no different than a client in California seeing a slight increase in rate due to a tornado in Kentucky,” Whistle said.
Still, wildfire and tornado risks are not highly correlated, and Whistle believes the effect of California wildfires on Kentucky’s market should be limited.
Whistle notes that that roughly 80% of damage from the recent California wildfires affects residential properties, with the remaining 20% impacting commercial assets. Because reinsurers – insurance for insurance companies – cover both commercial and retail accounts, the long-term impact on Kentucky’s market could take time to materialize.
Are insurers leaving the Kentucky market?
In states like Florida and California, where hurricanes and wildfires have become more severe and frequent, some insurers have exited the market entirely. While Kentucky faces its own risks—particularly from convective storms—insurance experts don’t anticipate large-scale departures from the Bluegrass state.
“Markets rely heavily on their analytics and modeling to project future losses,” Whistle explains. “While never a perfect science, there are clear trends in certain geographies that steer them away.”
If extreme weather events in Kentucky increase in severity and frequency, insurers may reconsider their involvement in the state. For now, Kentucky remains a viable market, but ongoing monitoring and preparedness will be essential.
Reducing risk and managing costs
For homeowners, businesses, organizations, and public entities, mitigating risk is key to limiting the rising cost of insurance premiums. One of the most effective strategies is providing insurers with accurate and detailed property information. Important factors include:
- Construction type
- Building age
- Presence of fire sprinkler systems
By demonstrating proactive risk management, policyholders can improve their standing with insurers and potentially secure more favorable rates.
“Showing some evidence of forward thinking and a plan to limit loss in the event of damage is music to an insurer’s ears,” Whistle advises.
