Wildfires among the costliest on record
The wildfires still raging in California will be among the costliest wildfires on record for US P&C insurers and could cost the industry up to $6 billion, according to early industry estimates.
Moody’s has released a report assessing the impact of the wildfires in California on property/casualty insurers, in which it suggests that assuming an average value of $802,000 per structure, losses would be close to $4.6 billion and growing as the fires continue.
“Based on history and the number of structures damaged, insured losses will run into the billions of dollars, a credit negative,” the report states. “These fires will be among the costliest wildfires on record for US P&C insurers, which were already hit by high third-quarter catastrophe losses from hurricanes Harvey, Irma and Maria and the Mexico earthquakes.”
The confirmed death toll has risen to 40, more than 217,000 acres have burned, and it is estimated that 5,700 structures have been destroyed.
Risk modelling firm RMS suggested late last week that insured losses could be between $3 and $6 billion.
CoreLogic estimates there are over 172,000 homes exposed to wildfire risk in the Napa and Santa Rosa metro areas, with a combined reconstruction cost of more than $65 billion.
Most of the damage will fall into homeowners’ and commercial property coverages, while there could be limited effect on other lines of business such as auto physical damage and inland marine, according to Moody’s.
According to catastrophe modelling firm AIR Worldwide, winds moderated on Sunday, October 15, allowing firefighters to make progress towards containing the 15 large wildfires active across California.
Almost 75,000 people remained evacuated. At the time of writing mandatory evacuation orders have been lifted in some areas, including the cities of Napa and Calistoga. Although winds have died down temporarily and light rain is forecast for the region later this week, the situation remains extremely volatile, AIR said.
Temperatures will likely be cooler over the next few days and winds are expected to ease, but may shift again later this week. Significant rainfall is unlikely, but according to the National Weather Service, a system from the Gulf of Alaska may bring light rain to the region on Thursday morning.
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