The devastating wildfires tearing through Los Angeles are now projected to cause losses of up to $30 billion for the insurance industry, nearly a week after they first ignited.
This new estimate, released by analysts from Wells Fargo & Co and Goldman Sachs Group Inc, significantly surpasses previous predictions. Last week, JPMorgan Chase & Co had estimated the damage at around $20 billion.
Home-insurance providers are expected to shoulder the largest share of the costs, with companies like Allstate Corp, Chubb Ltd, American International Group (AIG), and Travelers Cos identified as the most exposed insurers, according to Wells Fargo’s report on January 12.
Other insurers, such as Mercury General Corp and Cincinnati Financial Corp, are also highly vulnerable, though they were not included in the bank’s analysis.
In addition to US-based insurers, global property and casualty companies are starting to recognise the magnitude of the damage. Japan’s Tokio Marine Holdings Inc is already making efforts to expedite claims processing for those affected.
However, President Satoru Komiya cautioned that it’s still too early to assess the full impact on the insurer’s business performance.
Along with other Japanese firms like MS&AD Insurance Group Holdings Inc and Sompo Holdings Inc, Tokio Marine is collectively exposed to about 3% of the insured damage from the fires, according to Bloomberg Intelligence analyst Steven Lam.
The situation in Los Angeles remains dire, as wind gusts continue to worsen the fires, hampering firefighting efforts. At least 24 people have been confirmed dead, and over 12,000 buildings across more than 40,000 acres in neighborhoods like Pacific Palisades and Altadena have been reduced to rubble.
Goldman Sachs analysts now estimate insured losses between $10 billion and $30 billion, with the total damage—factoring in uninsured losses—potentially climbing to $40 billion.
Additionally, the fires are expected to have a negative effect on U.S. nonfarm payroll growth in January, potentially reducing job growth by 15,000 to 25,000, according to their analysis.
As of Monday, the Palisades and Eaton fires remain largely uncontrolled, with authorities continuing their battle against the blazes.
