Multiple wildfires have caused tragic loss of life, widespread destruction of property, and mass evacuations in California. According to the California Department of Forestry and Fire Protection, the largest of those fires (Palisades and Eaton) are still uncontained, as strong winds and extremely dry conditions continue to maintain the threat of extreme fire spread.

In recent days, the devastating wildfires have spread across almost 30,000 acres, killing ten, and impacting the city of Los Angeles and its suburbs. The Palisades Fire, believed to be the most destructive in LA’s history, had grown to over 17,000 acres with 0% containment as of Thursday morning, according to Guy Carpenter. CalFire reported that some 300 structures had been destroyed, while the LA County Fire Department estimated the number at over 1,000.

Containment efforts involve five large air tankers, ten helicopters, and over 7,500 state personnel, including 4,700 CalFire staff. Neighbouring states have also contributed additional fire engines.

Infrastructure disruptions have left at least 257,000 residents without power in Southern California, including 82,000 in LA County, according to Guy Carpenter, while water supply issues in parts of the state are straining a critical resource needed for fire suppression.

As conditions improve, assessments of economic and insurance costs will commence, with early estimates indicating significant losses for P/C insurers.

Early this morning, JP Morgan doubled its insurance loss estimate from a day before to US$20bn, anticipating Allstate, Chubb and Travelers to be the most impacted carriers, given their exposure to the homeowners’ market.

Insured losses are anticipated to stem from property damage, including structural effects from direct fire, and interior effects from smoke to surviving structures. Substantial time element losses are also expected due to power outages and mass evacuations, alongside potential health consequences.

Commenting on the unfolding situation, Moody’s Ratings said losses will be shared among standard homeowners insurers, insurers specialising in high-value E&S homeowners policies, the California FAIR Plan and commercial property insurers. Reinsurers will also assume losses through quota share, per-risk and excess of loss contracts.

“We expect insured losses to run well into the billions of dollars, given the high value of homes and businesses in the affected areas, and to cause large losses for P/C insurers with significant homeowners and commercial property market share in Los Angeles,” said Jasper Cooper, CFA, vice-president and senior credit officer, Moody’s Ratings. “It will take weeks or months to determine the magnitude of the insured damages, but the Los Angeles wildfires are likely among the most costly wildfires in the state's history.”

Late Thursday, Accuweather estimated the economic losses from the fires at between US$135bn and US$15bn.

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