California wildfires slated for multi-billion dollar insured losses
Source: Asia Insurance Review | Dec 2018
The series of wildfires that raged across the state of California is expected to cost the insurance industry several billion dollars in pay-outs, according to Aon’s Impact Forecasting.
While it is too early to estimate the damages from the wildfires, an A.M. Best report expects that 2018 losses will be at record levels for California. “The potential for historic losses was already likely before the Woolsey fire ripped through the wealthier area of Malibu, which has a median home value of approximately $2.9m. Also, at risk are many commercial structures and locations in the area that are used in the film and television industry. Many primary insurers limit their exposure to high-value properties and cede exposure outside of their tolerances to reinsurers,” the report stated.
The wildfires were exacerbated by powerful offshore winds – Santa Ana winds in the north and Diablo winds in the south – and swept across Northern and Southern California in early November. Down sloping winds off the Coast Range and Sierra Nevada mountains were critical in the fire ignition process. The deadly wildfires have forced hundreds of thousands of residents to evacuate.
The most catastrophic fire was the Camp Fire in Butte County, where the city of Paradise was largely destroyed. CalFire cited that 6,453 homes and 260 businesses were destroyed, making the Camp Fire the most destructive on record in California. The fire also left 29 people dead and many others unaccounted for; equalling the deadliest fire on record in the state.
Additionally, the Woolsey Fire destroyed at least 177 homes and left two people dead in Ventura and Los Angeles counties.
The wildfire peril has become increasingly costly for the insurance industry in recent years. Annual insurance pay-outs (adjusted to 2018 dollars) have surpassed the $1bn threshold just nine times since 1990. However, 2018 marked the fourth consecutive year of such an occurrence – even prior to the November wildfire events in California.
The historic 2017 wildfires in the US led to nearly $16bn in insurance payments; almost entirely from the October and December events in California. A