LA wildfires have likely destroyed 10,000+ buildings, costing insurers ‘billions’

At least ten people are confirmed dead, and more than 10,000 structures are likely to be destroyed by the wildfires still raging across the Los Angeles area.

The Palisades fire (pictured), the closest to the coast and the largest of the fires, has forced evacuation orders for at least 30,000 residents of the affluent Pacific Palisades community.

More than 100,000 people have been evacuated in the broader LA area, as officials warned high winds could further fan the flames.

The wildfire has already burned through at least 11,802 acres and is “0% contained”, according to the latest ICEYE latest insight, issued in its second analysis release.

Scores of Hollywood celebrities have told the press or taken to social media to say their luxury homes are among the thousands destroyed by the blaze.

“We would expect insured losses to run in the billions of dollars given the high value of homes and businesses in the impacted areas,” said Jasper Cooper, senior credit officer, Moody’s Ratings.

California fire chief David Acuna said he lacked “hard data”, but that more than 10,000 structures are likely to have been destroyed, speaking to BBC Radio 4’s Today programme.

ICEYE said its team had already analysed more than 5,000 buildings in the area and observed that more than 1,500 of these are likely damaged. ICEYE has been monitoring the severe wildfires affecting the LA area since 7 January.

Acuna said the “significant shock” of this wildfire is in the number of structures destroyed.

“It is unusual to have such a densely populated area with such a large fire roll through that,” he said.

Commentary from Moody’s warned of the insured losses for US commercial property insurers, excess and surplus (E&S) homeowners’ business, as well as California FAIR Plan claims.

FAIR Plan is a syndicated fire insurance pool comprised of all California-licensed P&C insurers, established to meet the needs of homeowners unable to find insurance in the traditional market.

“The wildfires in the Los Angeles region have caused tragic loss of life and widespread destruction of property,” Cooper said.

“Losses will be shared among standard homeowners’ insurers, insurers specialising in high-value E&S homeowners’ policies, and the California FAIR plan. In addition, commercial property losses could be significant,” he added.

The wildfires are fueled by a combination of strong Santa Ana winds reaching speeds up to 80mph, critically low humidity, and persistent drought conditions.

These factors underscore the critical importance of managing and mitigating wildfire risks, ”particularly as they relate to homeowners’ insurance”, noted Moody’s.

“Amidst the challenges posed by these recurring catastrophe events, the regulatory landscape for wildfire insurance in the state is indeed evolving, reflecting a concerted effort to adapt to these heightened risks,” said Firas Saleh, director, North American wildfire models, Moody’s.

Recent regulatory advancements by the California Department of Insurance to allow use of catastrophe models in the ratemaking process for wildfire insurance, mark a significant shift in approach, he suggested.

On January 2, the department started accepting pre-application required information determination (PRID) petitions, Saleh observed.

“This strategic move is aimed at improving the accessibility of insurance, by more accurately assessing the risks associated with wildfires. By leveraging advanced modeling techniques, insurers can offer policies that are both fair and reflective of the actual risk to properties. This is a pivotal step towards fostering a more resilient community, one that is better prepared to face the escalating threats posed by wildfires,” he said.

“This approach not only helps in accurately pricing insurance but also plays a crucial role in driving broader community resilience efforts. Homeowners are incentivized to adopt fire-resistant building materials, create defensible spaces, and implement other risk reduction measures, thereby potentially lowering their insurance costs while enhancing safety,” Saleh added.