KCC estimates insured loss from LA wildfires at close to $28bn

Karen Clark & Company (KCC) has estimated that the insured loss (from privately insured and FAIR plan policies) to residential, commercial, and industrial properties, and autos from the Palisades and Eaton Fires in Los Angeles will be close to $28 billion.

This estimate, which is based on the high-resolution KCC US Wildfire Reference Model, includes damage from the fires, as well as smoke, time-element losses for residents in evacuation zones whose homes were not damaged by the fire, guaranteed replacement cost coverage, and demand surge.

According to KCC, the Palisades Fire burned nearly 24,000 acres across the Santa Monica Mountains and the towns of Pacific Palisades and Eastern Malibu.

Meanwhile, the Eaton Fire burned over 14,000 acres across the Angeles National Forest and the towns of Altadena and Sierra Madre.

“Along with the devastating fire damage, the fires are likely to produce a high volume of smoke claims that extend far beyond the fire perimeters,” KCC added.

The firm noted that most of these claims will result from the Eaton fire, which emitted high concentrations of smoke that were transported across the Los Angeles basin.

KCC additionally observed that California authorities have a strong incentive to stabilise the insurance market, so there will likely be efforts in place to expedite the rebuilding process, control cost increases, and avoid saddling insurers with excess and uncovered losses.

The firm continued, “A primary area of uncertainty in the loss estimates is the proportion of homeowners and business owners in impacted areas who are insured. KCC has assumed that the majority of properties in the area are insured either privately or through the FAIR plan, but the $28 billion estimate contemplates a small percentage that are likely uninsured.”

Verisk’s Extreme Event Solutions division recently estimated that insured losses to property from both the Palisades and Eaton Fires will land between $28 billion and $35 billion.

This is in line with Moody’s RMS’ estimate of $20 billion to $30 billion, while CoreLogic’s $35 billion to $45 billion range remains the highest.

With this in mind, Fitch Ratings has estimated that at $35 billion, roughly the mid-point of insurance industry loss estimates from the wildfires 30% of the aggregate natural catastrophe budgets set by Europe’s big four reinsurers for 2025 may be eroded.

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