The destructive wildfires engulfing Los Angeles continue to burn and with containment efforts currently yielding little success, analysts at J.P. Morgan have doubled their preliminary insured loss estimate for the event to $20 billion or more, which would make it the costliest insured wildfire loss event in California’s history.
As analysts explain, economic losses from the wildfires have more than doubled since yesterday, with forecaster AccuWeather providing a range of $52 billion to $57 billion.
Late yesterday and this morning, numerous analysts put out preliminary insured loss estimates, based on preliminary assessments and historical wildfire events in the region, including J.P. Morgan analysts who said the insurance industry bill could be $10 billion.
This has since doubled, with analysts at J.P. Morgan now estimating insured losses from the fires could surpass $20 billion, and even more if the fires are not contained, which remains a very real challenge for firefighters amid strong winds and dry conditions.
“This would make this event significantly more severe than the 2018 Butte County Camp fires, the highest insured loss wildfires in California’s history previously (with insured losses of roughly $10 billion). Insured losses in the Butte Camp fire were close to two-thirds of economic losses (about $15 billion),” explain analysts.
The Butte Camp fire impacted more than 150,000 acres and affected over 18,000 houses / buildings. Currently, the January 2025 LA wildfires haven’t affected as many acres or houses / buildings, but it’s important to remember that the wealthy Pacific Palisades area has thus far experienced most of the damage, which is an area with high value residential homes, with a median home price of more than $3 million compared with less than $500,000 in Butte County.
“Moreover, the fires have not been contained thus far and continue to spread, implying that estimates of potential economic and insured losses are likely to increase,” continue analysts.
J.P. Morgan anticipates the majority of insured losses to hit the homeowners’ line of business, with primary insurers poised to assume a greater share of the loss than reinsurers.
“Given the increase in loss estimates over the past day, we expect reinsurers to experience sizeable losses as well. Nonetheless, we expect primary insurers to incur a greater proportion of losses compared to reinsurers than for similar severity events in the past, driven by the increase in reinsurance attachment points and limited availability of aggregate covers since 2023,” J.P. Morgan said.
Recently, global ratings agency Moody’s provided some commentary on the LA fires, also pointing to insured losses in the billions of USD.
“The wildfires in the Los Angeles region have caused tragic loss of life and widespread destruction of property. We would expect insured losses to run in the billions of dollars given the high value of homes and businesses in the impacted areas. Losses will be shared among standard homeowners insurers, insurers specializing in high-value E&S homeowners policies, and the California FAIR plan. In addition, commercial property losses could be significant,” said Jasper Cooper, Vice President-Senior Credit Officer, Moody’s Ratings.
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