Although fires are still raging in Southern California, economists are already estimating that the January blazes could end up as the most expensive fire event in history.
AccuWeather, a commercial weather forecaster, estimated late on Wednesday that the wildfires could cost between $52 billion and $57 billion.
JPMorgan (JPM-0.02%) pinned the damages at close to $50 billion, including more than $20 billion in insured losses, the Wall Street Journal (NWSA-0.47%) reported Thursday. Morningstar DBRS (MORN+0.41%) has estimated total insured losses of more than $8 billion.
AccuWeather notes that the total damage and economic loss from the wildfires that ravaged Maui last year — and resulted in the deadliest wildfire the U.S. has seen in more than a century — was between $13 billion and $16 billion. By insured losses, the most expensive wildfire in U.S. history was the 2018 Camp Fire, which destroyed more than 18,000 structures and cost more than $12 billion.
“This is already one of the worst wildfires in California history,” Jonathan Porter, AccuWeather’s head meteorologist, said in a statement. “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.”
More than 45 square miles have been scorched by the wildfires, and 179,000 people have been put under evacuation orders. At least five people have died, although officials believe the death toll is likely higher. According to CBS News, more than 1,300 structures have already burned, and the blazes threaten more than 60,000 structures.
The cost of the wildfires is likely to add pressure to what the state’s top insurance official called California’s “insurance crisis,” caused by regulations that — according to the state’s insurance department — led to “rate spikes and ballooning premiums.” As wildfires have gotten worse around the world, insurers have been more wary about exposure.
“These events will continue to have widespread, negative impacts for the state’s broader insurance market—increased recovery costs will likely drive up premiums and may reduce property insurance availability,” Moody’s Rating analyst Denise Rappmund said in a statement.
In 2023, State Farm said it would stop offering home insurance to new customers in California, as did Allstate (ALL+3.10%), partially citing the increased risk of wildfires. Last March, State Farm said it would stop renewing coverage for about 30,000 clients, citing financial hits caused by inflation and “catastrophe exposure.” E&E News reported last year that seven of California’s 12 largest property insurers had limited coverage.
Meanwhile, the use of California Fair Access to Insurance Requirements Plan, a state insurance program that provides basic coverage, has exploded. The total number of new dwelling and commercial policies grew by 137% between September 2023 and September 2024. Total exposure over that time grew 61% to $458 billion.
“It’s a ticking time bomb,” Michael D’Arelli, executive director of the American Agents Alliance, an insurance agents’ association, said at a March hearing. “We are going to have a major event and meltdown.”
The post Economists have already put a price on California’s wildfires appeared first on Quartz.
