The Los Angeles wildfires are set to become among the costliest in US history, with losses already estimated at more than $50 billion (£40 billion).
In a preliminary estimate, private forecaster Accuweather said it expected losses of between $52 billion and $57 billion as fires ravage an area that is home to some of the most expensive properties in the United States.
The insurance industry is also bracing for a major hit, with analysts at firms including Morningstar and JP Morgan forecasting insured losses of more than $8 billion.
Nearly 2,000 structures were damaged or destroyed in the fires, which also left at least five people dead.
As authorities continue to work to contain the fires, the extent of the losses continues to be revealed.
“It’s a terrible disaster,” said Accuweather chief meteorologist Jonathan Porter.
The 2018 fire that broke out in Northern California near the town of Paradise is currently the disaster with the highest insured costs, around $12.5 billion, according to the insurance giant. Aon insurance.
That fire, known as the Camp Fire, killed 85 people and displaced more than 50,000.
The high property values in this case mean it will likely end up being one of the five costliest wildfires in the United States, said Aon, which reviews insured losses.
Nearly 200,000 people in the Los Angeles area are under evacuation orders, and another 180,000 are under warnings.
Even once the situation is under control, Porter said the events could have long-term effects on health and tourism.
This also creates problems for the insurance sector, which was already in crisis.
In the United States, homeowners with mortgages are generally required by banks to purchase homeowners insurance.
But companies have raised their prices – or canceled their coverage altogether – in the face of growing risks from natural disasters such as fires, floods and hurricanes.
As companies stop offering coverage, people are increasingly turning to homeowners insurance plans offered by state governments, which are generally more expensive while offering less protection.
In California, the number of policies offered under the state’s Fair plan has more than doubled since 2020, from about 200,000 to more than 450,000 in September of last year.
Areas affected by fires are among the places with the highest demand, according to data from the program, which already warned of risks to its financial stability.
Denise Rappmund, a senior analyst at Moody’s Ratings, said the fires would have “widespread negative impacts on the state’s broader insurance market.”
“Increased collection costs will likely lead to higher premiums and could reduce the availability of property insurance,” she said, adding that the state also faces potential long-term damage on property values and strain on public finances.
