LA wildfires losses could top $41b for insurance industry

LOS ANGELES – Wildfires that have ravaged swathes of Los Angeles could result in losses of as much as US$30 billion (S$41 billion) for the insurance industry, as the blazes rage on almost a week after they ignited.

The new estimates from Wells Fargo & Co and Goldman Sachs Group analysts significantly exceed last week’s highest prediction from JPMorgan Chase & Co that the fires stood to cost insurers roughly US$20 billion. 

Home insurance providers will bear the brunt of the cost. Allstate, Chubb, American International Group and Travellers are the most exposed among the firms covered by Wells Fargo analysts, according to a note the bank sent to clients on Jan 12. 

The most exposed insurers not covered by the bank include Mercury General and Cincinnati Financial, according to the analysts. 

Global property and casualty insurers are also beginning to acknowledge the disaster’s impact. 

Japan’s Tokio Marine Holdings is “making groupwide efforts to pay insurance claims to those affected as quickly as possible”, president Satoru Komiya said at a briefing in Tokyo on Jan 14. It is too early to estimate the impact of the LA wildfires on the insurer’s business performance, he said.

Tokio Marine along with Japan’s MS&AD Insurance Group Holdings and Sompo Holdings are collectively exposed to about 3 per cent of insured damage from the California fires, according to an estimate from Mr Steven Lam, an analyst with Bloomberg Intelligence.

Los Angeles is

grappling with a second week of wind gusts exacerbating wildfires

and hindering firefighters’ efforts to contain them. At least 24 people have died and more than 12,000 buildings across over 16,000ha in the Pacific Palisades and Altadena neighborhoods burned to the ground.

Goldman Sachs analysts estimated insured losses between US$10 billion and US$30 billion, likely rising to around US$40 billion when taking into account uninsured losses, according to a note dated Jan 13. The fires are expected to have a drag on US nonfarm payrolls growth of 15,000 to 25,000 in January, the bank added.

As at Jan 13, the Palisades and Eaton fires remained largely uncontrolled. Bloomberg