The estimated total cost of the destructive southern California wildfires has nearly tripled as first responders struggle to contain the largest blazes. The economic toll could reach $135 billion to $150 billion, according to experts at AccuWeather, up from their previous high estimate of $57 billion.
“Hurricane-force winds sent flames ripping through neighborhoods filled with multi-million-dollar homes,” AccuWeather Chief Meteorologist Jonathan Porter said in a statement. “The devastation left behind is heartbreaking and the economic toll is staggering. To put this into perspective, the total damage and economic loss from this wildfire disaster could reach nearly 4 percent of the annual GDP of the state of California.”
As the fires spread, more than 180,000 residents evacuated their homes. So far, 10 have been confirmed dead as of the morning on Friday, Jan. 10. The Palisades Fire is the biggest, burning through more than 30 square miles and destroying more than 5,000 buildings. The blaze was just 6% contained as of the evening on Thursday, Jan. 9.
As officials work to contain the fires, which continue to grow in size, AccuWeather experts say the estimate for “total damage and economic loss may be revised upward, perhaps even substantially.”
The area from Malibu to Santa Monica has some of the most expensive properties in the United States. The median home value in the area is more than $2 million, with Pacific Palisades sitting right in the middle of the region.
If AccuWeather’s estimates ring true, these fires will become the most costly natural disaster in U.S. history.
Hurricanes tend to be the most costly natural disasters in the U.S. Hurricane Katrina in 2005 is currently the most costly in history, according to Kiplinger, which compiled data from NOAA and adjusted for inflation.
Most expensive natural disasters in U.S. history
- 5. Superstorm Sandy (2012), $82.0 billion.
- 4. Hurricane Maria (2017), $107.1 billion.
- 3. Hurricane Ian (2022), $112.9 billion.
- 2. Hurricane Harvey (2017), $148.9 billion.
- 1. Hurricane Katrina (2005), $186.3 billion.
Meanwhile, insured losses from the southern California fires could reach $20 billion, according to JPMorgan. Analyst Jimmy Bhullar said that number could rise “even more if the fires are not controlled.” Raymond James issued a similar estimate, saying insured losses could range from $11 billion to $17.5 billion. Morningstar analysts estimated insured losses will exceed $8 billion.
To date, the most expensive wildfire by insured losses is 2018’s Camp Fire.
Most expensive wildfires (by insured losses)
- 5. Oakland Fire (1991), $3.9 billion.
- 4. Lahaina/Maui Fires, $4.4 billion.
- 3. Woolsey Fire (2018), $5.3 billion.
- 2. Tubbs Fire (2018), $11.1 billion.
- 1. Camp Fire (2018), $12.5 billion.
“When you have these things like wildfires or hurricanes or floods, and the loss affects a large portion of the population, especially in a very small geographical area at the same time, insurance works, but it doesn’t work as well,” said Chuck Nyce, a professor of risk management and insurance at Florida State University. “It becomes more expensive, and the losses to the insurance company, when they become what they call ‘correlated,’ it makes insurance companies’ cost of capital higher, it makes their losses higher, it makes them more reluctant to do a large volume of business in a specific area.”
As insured losses mount, homeowners in the area will face an uphill battle to rebuild.
State Farm, a major insurer in the state, reportedly canceled hundreds of policies for homes in the Pacific Palisades over the summer to avoid “financial failure.” But there are options for those who can’t find private coverage in their communities.
“People forget that if you look across the United States, if you look at the first three quarters of 2024, there were 25 different events in the United States that caused more than a billion dollars in damage to properties,” Nyce told Straight Arrow News. “When we think about these disasters, we think of these areas like, ‘Oh, Florida is the problem,’ or, ‘Oh, California is the problem.’ They are much more widespread than people realize.”
In California, Fair Access to Insurance Requirements (FAIR) “is a syndicated fire insurance pool comprised of all insurers licensed to conduct property/casualty business in California.” It is an insurer of last resort, when homeowners can’t get policies from private companies.
The program uses no public or taxpayer funding, but that doesn’t stop the cost from being spread to policyholders throughout the state.
As estimates of the total economic toll and insured losses continue to rise, a number of major players in insurance saw their stock slide to open trading on Friday. This includes firms like Travelers, Allstate and AIG.
