From the ILS/reinsurance/cat bond mavens at Artemis, January 9:
More wildfires broke out in the Los Angeles area of California over night meaning the property damage has continued and early estimates from some of the insurance industry focused equity analyst teams suggest a potential industry loss in the $6 billion to as high as $13 billion range.
At the same time, forecaster Accuweather has come out with an economic loss estimate for the wildfires that continue to burn out of control in Los Angeles suburbs, saying the total could be between $52 billion and $57 billion.
We have to stress, these wildfires are a developing situation and clarity over the number of structures destroyed and damaged remains limited.
As we reported late yesterday, the LA fire chief said in a press conference that more than 1,100 structures had been destroyed by the wildfires that continue to burn out of control in the Los Angeles, California suburbs.
Overnight, the Los Angeles Times newspaper has increased the figure to now more than 2,000 homes, businesses and other buildings having been damaged or destroyed by the fires, while at least five deaths have been reported.
Now, seven named fires have broken out, with new blazes in the Hollywood Hills and other areas around the city and the main Palisades fire has continued to burn without containment.
On the weather front, forecasters say there could be a period of lower winds today for a time, which might allow firefighters to gain more control of the wildfires, but later the winds are expected to pick up again which will make firefighting conditions challenging again.
On the economic loss front, forecaster Accuweather said its, “preliminary estimate of the total damage and economic loss from devastating wildfires in California is $52-$57 billion.”
“This is already one of the worst wildfires in California history. 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,” AccuWeather Chief Meteorologist Jonathan Porter commented.
The company added that, “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.”
Analysis of Zillow pricing for real estate in the region shows a roughly $3.5 million average home value in the area of the Palisades fire and $1.25 million around the Eaton fire.
Accuweather puts its estimate into context by comparing to the wildfires in Hawaii in 2023, saying, “the total damage and economic loss from the wildfires in Maui in 2023 was $13-$16 billion.”
That Maui wildfire was estimated to have driven insurance industry losses of up to $4 billion.
Onto the analyst estimates we have seen, which suggest a costly multi-billion dollar industry loss event for the insurance and reinsurance industry from these wildfires in California.
Evercore ISI analysts compared it to the Maui fire as well, saying, “The Maui fire had insured losses of $3-4b and damaged >2,200 structures (the average home value in Maui was $1.25m and we suspect the reconstruction costs were likely elevated given the location).
Adding, “With half that many structures already damaged in the current CA fires and given how quickly they are spreading (still 0% contained), we think the insured loss could easily be double the Maui fire loss (~$6-8b) but we will continue to monitor the situation.”
So that gives an initial baseline for a potential loss quantum, based on the 1,100 structures reported damaged yesterday and the fact many of those are in an area with higher value homes than the Maui fire.
But, with more fires having sprung up overnight and others still spreading uncontrolled, the tally of structures destroyed is likely higher already, as implied in the LA Times estimate of more than 2,000 homes, businesses and other buildings having been burned.
It seems safe to assume the toll will continue to increase, as firefighters continue to be challenged.
Meanwhile, BMO Capital Markets analysts said that at around the $3.5 billion level of insurance industry loss they believe these fires would put downward risk on their EPS estimates for Q1 for covered re/insurers in their universe.
At an industry loss above $7 billion, the fires would begin to put earnings per share at-risk for first-quarter results across the insurance and reinsurance industry.
They explained that 2017 and 2018 were the worst wildfire loss years on record, when wildfire insured losses totaled over $16bn and $14bn respectively....
....MUCH MORE
That embedded hyperlink above is to January 8's "Over 1,100 structures said destroyed by Los Angeles California wildfires: LA Fire Chief".
Previously, a look at the top twenty stories on KTLA-television's front page:
"Palisades Fire torches 1,000 structures, most destructive in Los Angeles history"
