California Wildfire Claims Could Drain $21 Billion Insurance Fund Amid Investigation

California’s $21 billion wildfire fund may not withstand the financial impact of the Eaton Fire, which has already resulted in 17 deaths and the destruction of over 9,000 structures in Los Angeles. Investigators are currently assessing whether Southern California Edison’s equipment caused the fire—a finding that could trigger a wave of insurance claims and lawsuits underwritten by the state-backed fund.

The Catastrophe Response Council, which oversees the fund, is warning that the Eaton Fire alone could nearly or entirely exhaust available resources. Verisk estimates claims from this fire could total $15.2 billion, with combined losses from the Eaton and Palisades fires reaching up to $45 billion. If utility equipment is confirmed as the ignition source, the resulting liabilities could overwhelm the fund’s capacity.

Established in 2019 to prevent utility bankruptcies following major wildfires, the fund draws from both utility payments and customer surcharges. Now, council members are considering measures to conserve remaining capital, including redefining claim criteria, limiting third-party payouts, and reducing legal costs that could consume large portions of the fund.

In response to hedge funds acquiring subrogation rights and escalating legal fees—potentially up to 50% of settlement values—the council and the California Earthquake Authority are pushing for reforms to prioritize direct recovery for affected homeowners. The situation underscores the ongoing financial risks tied to utility infrastructure in California’s wildfire-prone regions.