The destruction caused by the Los Angeles wildfires is expected to range in the tens of billions of dollars, which would make it one of the costliest natural disasters in U.S. history.
Jimmy Bhullar, an analyst for JPMorgan, estimated total economic losses from the fires at close to $50 billion, double the estimate of a day earlier, The Wall Street Journal reported Thursday. That includes insured losses, which he estimated at more than $20 billion and "even more if the fires are not controlled."
The 2018 Camp Fire in northern California's Butte County was the nation's most destructive wildfire, inflicting insured losses of about $12.5 billion, adjusted for inflation, the Journal reported, citing broker Aon. The Los Angeles Times reported Thursday the Camp Fire resulted in a total of $30 billion in losses.
Five fires have scorched thousands of acres in and around Los Angeles, forcing at least 130,000 people to be evacuated and damaging or destroying about 2,000 structures, according to the Times. At least five people have died.
The costliest natural disaster in U.S. history was Hurricane Katrina in 2005, which amounted to $102 billion in insured losses, adjusted for inflation, the Journal reported, citing Aon data provided to the Insurance Information Institute, an industry group. Hurricane Ian in 2022 was second with $56 billion.
Experts at ratings firm Moody's Ratings said they expected the insured losses stemming from the Los Angeles fires to run in the billions of dollars given the high value of properties in coastal Pacific Palisades, where the first blazes broke out Tuesday, according to the Times. Fires burning around Santa Monica and Malibu have torched homes that are among the most expensive in the country, with a median value of more than $2 million.
But many affected homes were not insured. California is the largest home-insurance market in the U.S. but also one of the toughest for companies to navigate. Eight of the 10 costliest U.S. wildfires through last year occurred in the state, after adjusting for inflation, according to Aon.
Leading insurers, including State Farm and Allstate, reportedly have stopped selling new home insurance policies in the state, saying rate increases approved by state regulators were insufficient to cover their losses, including from the devastating wildfires of 2017 and 2018.
The fires will have "widespread, negative impacts for the state's broader insurance market," said Denise Rappmund, a senior analyst at Moody's told the Journal. The cost "will likely drive up premiums and may reduce property insurance availability."
High losses could also lead to insurers — and their policyholders — being forced to bail out the state's Fair Plan insurer of last resort. The plan, which provides coverage for homeowners shunned by private insurers, can require private insurers to pay for claims it can't meet.
A spokeswoman for the Fair Plan told the Journal on Wednesday it has "payment mechanisms in place, including reinsurance, to ensure all covered claims are paid."