Catastrophe risk modelling firm RMS has estimated the economic costs of the wildfires in the wine region of California as between $6 billion and $8 billion, explaining that the high penetration rates of wildfire insurance coverage means that the industry loss is expected to be similar.
RMS’ estimate that the wildfire costs will rise to between $6 billion and $8 billion is based on losses from property damage, contents and business interruption to residential, commercial, and industrial lines of business from the fires in California. It does not include automobile or agricultural crop losses.
“High penetration rates of wildfire coverage in standard homeowners and commercial policies implies similar insured losses,” senior product manager Kevin Van Leer explained.
AIR Worldwide, meanwhile, put the insurance and reinsurance industry loss from the wildfires in northern California at up to $3 billion.
So opinions differ on the ultimate impact to re/insured assets, but the industry is steeling itself for a major loss event, perhaps the largest wildfire loss to insurance and reinsurance markets ever.
The California Fire authority has increased its estimate of structures destroyed by the wildfires to now 8,900.
RMS said that the 2015 Valley Fire in Lake County, California, saw Property Claims Services estimate a $1 billion insurance industry loss, based on 1,900 destroyed structures.
Property values in the region affected by the recent wildfires are higher, RMS said, so with 8,900 structures reported destroyed by the local authority it is easy to see how this loss is going to escalate.
Also adding weight to the estimate ranges, RMS’ high-resolution exposure database shows around 11,000 structures and more than $10 billion of total exposure within the fire footprints. Again, based on the 8,900 destroyed, it is easy to see that a large proportion of the $10 billion of exposure has been lost.
RMS’ analysis suggests that as many as 75% of structures in the area have been destroyed.
The California wildfires are going to add a significant bill to the 2017 catastrophe toll for the insurance and reinsurance industry.