The devastating Los Angeles wildfires are poised to become one of the costliest natural disasters in US history, with estimated losses already surpassing $135 billion. According to a preliminary estimate by private forecaster AccuWeather, the total losses could reach as high as $150 billion, making it one of the most expensive wildfires the country has ever seen, BBC has reported.
“These fast-moving, wind-driven infernos have created one of the costliest wildfire disasters in modern US history,” said AccuWeather Chief Meteorologist Jonathan Porter. The sheer scale of the destruction is staggering, with over 5,300 structures destroyed by the Palisades blaze and more than 5,000 structures destroyed by the Eaton Fire.
The insurance industry is bracing for a significant hit, with analysts from firms such as Morningstar and JP Morgan forecasting insured losses of over $8 billion. This could exacerbate the existing challenges faced by the industry, which has been 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 assessments and pricing strategies, potentially leading to higher premiums and reduced 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 around 200,000 to over 450,000 in September last year. Areas hit by the fires have seen some of the highest take-up rates, according to data from the program.
The long-term effects of the wildfires will be significant, with potential damage to property values, strain on public finances, and impacts on health and tourism. Denise Rappmund, a senior analyst at Moody’s Ratings, warned that the fires would have “widespread, negative impacts for the state’s broader insurance market.” She added that “increased recovery costs will likely drive up premiums and may reduce property insurance availability.”
The 2018 Camp fire in northern California currently holds the record for the highest insured costs, at around $12.5 billion. However, the Los Angeles wildfires are likely to surpass this total, given the high property values in the affected areas. Aon, a leading insurance company, has already indicated that this disaster is likely to rank among the top five costliest wildfires in US history.
However, the US and California government estimates on the damage are yet to be announced.