The devastating Los Angeles wildfires are poised to become one of the costliest natural disasters in US history, with estimated losses already exceeding $135 billion. The BBC reported that according to preliminary estimates from private forecaster AccuWeather, total losses could reach $150 billion, making it one of the costliest wildfires the country has ever seen.
“These fast-moving, wind-driven fires have led to one of the costliest wildfire disasters in modern U.S. history,” said Jonathan Porter, chief meteorologist at AccuWeather. The scale of the destruction is staggering, with over 5,300 structures destroyed by the Palisades fire and over 5,000 structures destroyed by the Eaton fire.
The insurance industry is preparing for a significant shock, with analysts at companies such as Morningstar and JPMorgan predicting insured losses of more than $8 billion. This could exacerbate existing challenges facing the industry, which is struggling to cope with the increasing frequency and severity of natural disasters. As the full extent of the damage becomes clear, insurers will be forced to reevaluate their risk assessment and pricing strategies, potentially leading to higher premiums and fewer coverage options for homeowners in high-risk areas. .
As a result, many people are turning to state government-backed insurance plans, which are often more expensive and offer less protection. In California, the number of policies offered through the state’s Fair Plan has more than doubled since 2020, from about 200,000 in September last year to more than 450,000. According to the program’s data, fire-affected areas have seen the highest fire rates.
The long-term effects of wildfires will be significant, including potential damage to property values, strain on public finances, and impacts on health and tourism. Dennis Rapmond, a senior analyst at Moody’s Ratings, warned that the fire would have a “broad, negative impact on the state’s broader insurance market.” “Increasing recovery costs are likely to increase premiums and reduce property insurance availability,” he said.
The 2018 Camp Fire in Northern California currently holds the record for the highest insurance costs, approximately $12.5 billion. However, given the high property values in the affected areas, the Los Angeles wildfires are likely to exceed this total. Leading insurer Aon has already indicated that the disaster is likely to rank among the top five costliest wildfires in US history.
However, US and California government estimates on losses have not yet been announced.
