The Los Angeles County wildfires are still burning and have now destroyed more than 10,000 structures, according to the Cal Fire authority, with insurance industry loss estimates still ranging from $10 billion to $20 billion, or higher if the fires continue to spread.
Five fires continue to burn across LA. The largest remains the Palisades Fire, which now covers almost 20,000 acres, has destroyed more than 5,300 structures, and is 6% contained.
According to officials, the large Palisades Fire has damaged houses and businesses, as well as smaller homes such as motorhomes and sheds.
The Eaton Fire has spread to 14,000 acres, and has destroyed an estimated 5,000 structures, according to Los Angeles County Fire Chief, Tony Marrone.
The Kenneth Fire, the newest of the five, now covers almost 1,000 acres, is 0% contained, but there’s not yet reports of damaged or destroyed structures. This is the same for the Hurst Fire and Lidia Fire – the former covers 700 acres and is 10% contained, and the latter almost 400 acres and is 60% contained.
As we reported yesterday, analysts at J.P. Morgan doubled their initial insured loss estimate for the fires to around $20 billion, a range also put out recently by analysts at RBC Capital Markets.
“Since the fires are still burning, it is difficult to obtain a full assessment of the damage, but we think this could produce losses of at least $10–20 billion (could be even higher depending on the longevity of the situation),” analysts at RBC said.
Early yesterday, insured loss estimates were hovering around $10 billion after forecaster AccuWeather warned of total economic losses of between $52 billion and $57 billion. However, the fires have since continued to spread and more and more structures have been affected, leading AccuWeather to significantly increase its preliminary estimate to a total loss of $135 billion to $150 billion.
“These fast-moving, wind-driven infernos have created one of the costliest wildfire disasters in modern U.S. history. Hurricane-force winds sent flames ripping through neighborhoods filled with multi-million-dollar homes. The devastation left behind is heartbreaking and the economic toll is staggering. To put this into perspective, the total damage and economic loss from this wildfire disaster could reach nearly 4 percent of the annual GDP of the state of California,” said AccuWeather Chief Meteorologist, Jonathan Porter.
The National Weather Service for LA has reported that “critical fire weather will last through Friday for portions of LA and Ventura counties, including major wildfire locations such as the Palisades Fire, the Eaton Fire and the Hurst Fire.”
Gusty winds persist and combined with still very dry conditions, will continue to fuel fire starts and existing fires, the National Weather Service for LA explained. But the threat doesn’t end Friday, with offshore winds poised to persist into early next week, which means there’s potential for the fires to spread and it’s likely firefighters will continue to struggle to contain the fires.
Prior to 2017, insurers in California had never experienced more than $5 billion in wildfire losses in a single year, but that all changed in 2017 when losses hit $15 billion and then $13 billion in 2018, and 2025 looks set to be another costly, potentially record-setting year for insured wildfire losses in the region.
“This wildfire disaster is going to be yet another major challenge for the insurance industry, and for home and business owners who are struggling to secure adequate insurance coverage in high-risk areas,” said AccuWeather’s Porter. “Families and businesses need to be able to purchase insurance at a reasonable rate, but insurance companies cannot continue absorbing huge loss after huge loss. This is a major issue that society needs to actually address in a world of increasing extreme weather impacts.”
Although this looks set to be a sizeable loss for the re/insurance industry, it’s worth noting that rating agencies have said that it will be manageable for the space, with primary insurers and the California FAIR Plan expected to assume most of the losses, with a smaller share falling to reinsurers.
The FAIR Plan is California’s insurance backup, designed to provide coverage to those unable to obtain insurance through other providers. The FAIR Plan has $2.63 billion of per-occurrence reinsurance as well as co-reinsurance as and assessments. The plan covers up to $3 million for residential and $20 million for commercial properties.
