American insurers are on the decline as estimated damages from the Los Angeles fire have reached $20 billion
Author: Manya Saini
(Reuters) – U.S. insurance stocks fell on Friday as analysts estimated that insured losses from wildfires threatening Los Angeles could reach as much as $20 billion, potentially making it the costliest disaster in California’s history.
A lull in the fierce winds that fueled the ring of wildfires that ravaged Los Angeles this week helped crews make progress in bringing the inferno under control, but forecasters say strong gusts could return over the weekend.
Analysts are assessing the financial impact of the disaster, and JPMorgan has doubled its forecast of insured losses to more than $20 billion. Wells Fargo also expects similar insured losses and says the total economic hit from the disaster could be well above $60 billion.
To ensure critical stability amid the devastation caused by the wildfires, California Insurance Commissioner Ricardo Lara invoked moratorium authority to suspend all non-renewals and cancellations of policies from insurance companies for one year.
Lara also called on insurance companies to stop any non-renewals and cancellations issued to homeowners before the fires started.
“My primary concern at this time is to ensure that wildfire survivors receive the insurance benefits to which they are entitled as soon as possible,” Lara said at a news conference.
The Pacific Palisades area is one of the most expensive neighborhoods in the US, home to Hollywood A-Listers and multi-million dollar mansions. Before this week’s disaster, insurance costs were among the most affordable in the country, according to a Reuters analysis.
But that is likely to change following the scale of losses expected in the wildfires now ravaging Los Angeles, as well as regulatory changes enacted late last year.
“Although leading US property and casualty insurers are in good financial shape, California’s property and casualty insurance market has been challenging … prompting many insurers to review their product offerings, including exiting the market altogether,” Morningstar DBRS wrote in a client note. .
The S&P Insurance Select Industry Index was last down 3.2% on Friday.
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The fires that engulfed the iconic neighborhoods of Los Angeles and penetrated through the Hollywood Hills have so far killed 10 people and destroyed almost 10,000 buildings.
Private forecaster AccuWeather estimated the damage and economic loss at $135 billion to $150 billion, pointing to a tortuous recovery and rising home insurance costs.
“It will take weeks or months to determine the extent of insured damage, but the Los Angeles wildfires are likely to be among the costliest wildfires in state history,” Moody’s Ratings said in a note.
