Verisk’s Extreme Event Solutions division has estimated that insured losses to property from both the Palisades and Eaton Fires in Los Angeles, California, will land between $28 billion and $35 billion, driven by losses to residential risks.
As containment efforts continue for the two largest fires to burn across Southern California since January 7th, Verisk is the latest risk modeller to release an initial estimate of the insurance industry impact.
Of the firm’s up to $35 billion insured loss range, the Extreme Event Solutions team estimates industry losses from the Palisades Fire of between $20 billion and $25 billion, and losses from the Eaton Fire of $8 billion to $10 billion.
Most of the losses are to residential risks, notes Verisk, adding that the areas hit in the Palisades Fire include some of the highest property values in the U.S., while many of the policyholders have significant contents exposure.
Verisk’s estimate includes losses due to fire and covers residential, commercial, and industrial properties and automobiles for their building, contents, and time element coverages. It’s also inclusive of estimated losses to the California FAIR Plan, which are expected to be considerable. Additionally, the estimated range takes into consideration demand surge, debris removal, and estimated insured take-up rates.
However, the estimate does not include losses from smoke damage, the Hurst fire or other fires during this past month, losses exacerbated by litigation, fraudulent assignment of benefits, or social inflation, or from guaranteed replacement cost coverage and ordinance or law coverage. It also excludes losses to uninsured properties and infrastructure, losses from extra-contractual obligations, losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event, and also loss adjustment expenses.
Rob Newbold, president of Extreme Event Solutions at Verisk, said: “The ongoing devastation from these deadly wildfires is truly heartbreaking. We are advancing science and risk management to help communities build resilience against disasters like these catastrophic wildfires. The amount of data and insights to support mitigation efforts continues to grow, which can help inform how communities rebuild in the wake of this disaster.”
This estimate of insurance industry losses from the wildfires follows Moody’s RMS’ range of $20 billion to $30 billion, and CoreLogic’s range of $35 billion to $45 billion, which remains the highest.
Alongside its loss estimate, the global data analytics and technology provider has issued an update on the Verisk U.S. Wildfire Model Review by the California Department of Insurance (CDI), which was submitted in early January. Verisk confirms that as of January 16th, its petition for model review has been granted by the CDI, which signals the next step in the process and a formal review.
“The use of catastrophe models in California is expected to provide consumers, insurers, and regulators with enhanced insights into natural disaster risks and increased insurance availability across the state,” said Verisk.
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