Destructive Wildfires in Los Angeles

LONDON (Reuters) – The most destructive wildfires ever recorded in Los Angeles may lead to insured losses amounting to billions of dollars, according to ratings agencies on Thursday, although many homes could remain uninsured.

The wildfires burning in neighborhoods such as Pacific Palisades, Eaton, and Hurst may result in insured losses exceeding $8 billion, as analysts from Morningstar DBRS reported. This figure surpasses the $6 billion in losses from the 2018 Woolsey fire in California.

Jasper Cooper, a senior credit officer for Moody’s Ratings, anticipates that insured losses could reach billions, primarily due to the high value of homes and businesses in the area.

Homeowners face challenges in securing insurance in catastrophe-prone states, as many firms have exited the market. Denise Rappmund, a senior analyst at Moody’s, stated, “These events will continue to have widespread, negative impacts for the state’s broader insurance market.” She noted that increased recovery costs will likely drive up premiums and may further reduce the availability of property insurance.

Morningstar DBRS also indicated that a larger-than-usual portion of losses may remain uninsured or be covered under the California FAIR plan, which aims to assist homeowners when standard insurance is unavailable.

JPMorgan‘s latest estimate suggests insured losses could rise to $20 billion, with The Insurer reporting this figure, marking a doubling of estimates in response to the escalating damage.