Although the number of structures destroyed seems to have stopped increasing for the last couple days the economic losses and the insured portion of the damage and destruction are heading higher with each new report.
First up, from AccuWeather, January 13:
To put the magnitude of loss into context, this latest damage and economic loss estimate surpasses the numbers for the entire 2020 wildfire season.
As fires continue to rage across Southern California and the scope of catastrophic damage, loss of life, business disruptions and other economic impacts becomes clearer, AccuWeather has updated and increased its preliminary estimate of the total damage and economic loss to between $250 billion and $275 billion.
“These fast-moving, wind-driven infernos have created one of the costliest wildfire disasters in modern U.S. history,” AccuWeather Chief Meteorologist Jonathan Porter said. “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."
The worst of the fires are burning in an area from Santa Monica to Malibu, impacting some of the most expensive real estate in the country, with median home values over $2 million. Should a large number of additional structures be burned in the coming days, it may become the worst wildfire in modern California history based on the number of structures burned and economic loss,” Porter added....
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And from the re/insurance/cat bond/ILS pros at Artemis, January 15:
BMS says LA wildfire insured losses likely to exceed $25bn. KBW analyses up to $40bn
Broking group BMS has said that it expects the insurance and reinsurance market losses from the Los Angeles region of California wildfires are likely to exceed $25 billion, while analysts at KBW have analysed what an industry loss of up to $40 billion might mean for the market.
Estimates for the insurance industry loss from the wildfires have been steadily rising, with many sitting in a range from $15 billion to $25 billion, within which most are now moving towards the higher-end.
However, some estimates now suggest $30 billion or even higher may be the final bill for the insurance and reinsurance market, while Dowling said between $30 billion and $50 billion.
Still, the estimates for the number of structures destroyed or damaged by the ongoing fire situation in Southern California is being reported to be around 12,300, so that has not changed for a few days.
What is changing the estimates is the analysis around property values and precisely which properties and streets have been destroyed, with more granular data emerging and helping make that analysis easier. As well as views on additional costs the insurance market will bear, from additional living expenses, through fine art losses, and business interruption.
Insurance and reinsurance broking group BMS has now issued its view, saying it believes the total insured loss could rise above $25 billion.
BMS explained, “Damage assessments are ongoing. It has been reported that the estimated average residential replacement values in the Eaton area are about $1 million and exceed $2 million in both the Malibu and Pacific Palisades areas. So, a quick estimate yields $17B in insurance losses to be the floor, but we know the insurance losses here will not be formed from this simple calculation.
“These losses will likely exceed $25B as several factors will start to come into play that lead to the question of just how high that loss might be.”
The broker further stated, “Some of the questions that need to be asked that could drastically increase the losses center on how much will be paid out in additional living expenses. Hyper-demand surges in labor and materials will no doubt be a significant factor in an already expensive area of the country. We know disasters like these will take years, if not decades, to recover, and there are questions about how quickly this will occur.”
The company further added, “Many of the homes are bespoke and high-value, so it will take extra effort to understand designs and replacement costs. What factors will new laws and ordinances for either earthquake or wildfire might increase the rebuilding efforts of some structures? There are no doubt questions about possible fine art losses that might be more common in wealthy areas that have been affected. Smoke damage to structures outside the wildfire perimeter could add to the losses. Adjusters will be at a premium, and what type of litigation from claims disputes might arise, which could increase the loss-adjusted expense. Commercial losses can be more complex to estimate, and the resultant business interruption will add to the losses.”....
....MUCH MORE
The inflationary impacts on the California housing and construction markets are going to be dramatic as devastated homeowners compete to find immediate shelter and begin contracting for builders and construction commodities.
And as Mssr. Bastiat pointed out long ago, there will be large upticks in GDP without any actual wealth building.(he was actually talking about windows but the larger GDP point is the end result of his observation)
