California Wildfires: Insured Losses Could Exceed $30 Billion, Says Wells Fargo Analysis
The ongoing wildfires ravaging Southern California, particularly in the greater Los Angeles area, are shaping up to be one of the costliest natural disasters in California’s history. According to a new analysis by Wells Fargo Securities, insured losses from the wildfires could surpass $30 billion, with estimates ranging between $20 billion and $40 billion.
Devastation in Southern California
The wildfires have claimed the lives of at least 24 people and caused widespread destruction, damaging or destroying over 12,000 structures in Los Angeles and surrounding areas. The extensive damage underscores the significant financial toll the fires will have on individuals, businesses, and the insurance industry.
Wells Fargo’s Analysis
Wells Fargo’s report, released Sunday, estimates that 85% of the insured losses—approximately $25.5 billion—will come from homeowners’ insurance policies. Another 13.5% ($4.05 billion) is expected from commercial property claims, while auto insurance losses will account for 1.5% ($450 million). The report notes that average property values in the affected regions are around $3 million, contributing to the substantial loss figures.
The financial impact on insurers, however, is deemed manageable. Wells Fargo analysts stated that even at the higher end of the estimated losses ($40 billion), the hit to insurer equity would be approximately 2%. Under the $30 billion “base case” scenario, the equity hit would be 1.6%.
Comparison to Past Wildfires
The Wells Fargo estimate, along with a $20 billion projection by JPMorgan released last week, positions the current Southern California wildfires as potentially the most damaging in the state’s history. These estimates significantly exceed the 2018 Camp Fire’s insured losses of $10 billion.
The 2018 Camp Fire, which devastated Paradise and nearby Northern California communities, caused 85 fatalities and destroyed more than 18,000 structures. Analysts note that the higher losses in Southern California this year are due to the fires’ proximity to larger population centers and higher property values.
Insurance Industry Preparedness
Despite the staggering numbers, Wells Fargo analysts remain confident in the insurance industry’s ability to absorb the financial impact. “Regardless of outcome, we see this as a manageable event for insurers,” the report states.
A Historic Catastrophe
If the projections materialize, the Southern California wildfires will mark a grim milestone, eclipsing previous records and highlighting the growing risks posed by wildfires in the state.
Source : Swifteradio.com
