According to a recent report from S&P Global Ratings, the ongoing Los Angeles wildfires could significantly impact homeowners, with insurance rates in the region likely to be heavily impacted.
S&P predicts that, following the event, property insurers will likely increase rates and/or limit coverage options. These measures may extend beyond California to other wildfire-prone states such as Washington, Oregon, and Colorado.
Rising insurance costs and affordability challenges could also affect California’s creditworthiness in the long term. However, S&P currently maintains a stable outlook for the state.
Regarding insured losses from the LA wildfires, S&P believes they will be manageable, with no significant impact on capital for its rated re/insurers. However, the full impact on Southern California and the insurance industry will only be clear once the fires are contained.
Various catastrophe risk modellers have provided initial insured loss estimates for the Palisades and Eaton Fires. CoreLogic estimates industry losses between $35 billion and $45 billion, Moody’s RMS predicts losses of $20 billion to $30 billion, Verisk forecasts between $28 billion and $35 billion, and KCC projects losses close to $28 billion.
Additionally, a recent Reinsurance News poll found that most respondents expect insured losses from the LA wildfires to approach or exceed $40 billion. Of the hundreds of responses, 42% believe losses will exceed $40 billion, while 28% expect losses to fall between $30 billion and $40 billion.
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