California wildfire damage potential said $25bn. Spread continues, fire weather forecast worsens

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Our latest wildfire update can be found here. California continues to be beset by dangerous fire weather conditions, with some of the strongest winds yet possible from Tuesday into Thursday, while the current wildfires are estimated to have put some $25 billion of property at severe risk of damage already.

Wildfire industry lossesIn the north of California the Kincade wildfire in Sonoma County win country remains the largest blaze and it has continued to spread in the last day, now reaching almost 75,000 acres burned.

In total the Kincade fire is still threatening over 90,000 properties right now, with the city of Santa Rosa still seen at risk of the fires spread and evacuations totalling close to 200,000 people in place.

Firefighters have made some ground on Monday, with the Kincade fire now 15% contained. But full containment is not expected until November 7th at the soonest, given the weather conditions will remain conducive to the burn continuing and its size continues to expand.

As of late Monday local time, the Kincade wildfire had destroyed some 124 structures (57 residential, 5 commercial and 62 others), with another 23 structures, largely residential, damaged as well.

Further details on the report from utility Pacific Gas & Electric (PG&E) that a fault occurred on one of its transmission towers close to where officials say the Kincade Fire started, near the town of Geyserville, are not yet available. The incident is still being investigated by the utility.

PG&E is already facing numerous issues, bankruptcy and enormous claims from previous fires among them. The insurance and reinsurance industry has now paid out billions in response to wildfires that have been deemed caused by PG&E’s equipment, leading to subrogation claims and other issues.

Meanwhile, the Tick wildfire in Canyon County, northwestern Los Angeles County was restrained at under 5,000 acres and now 82% contained by firefighters, with 29 structures destroyed and another 44 damaged. Around 10,000 residential properties are considered still under threat.

In addition, the Getty fire has burned over 600 acres and destroyed a number of homes in the high-value hillside communities of Brentwood and surroundings in the Los Angeles hills area.

As expected, fire fighters did gain greater control and save more threatened properties, but the fear is that weather conditions could cause the Getty fire to expand again today. Evacuations are in effect for an area spanning some of the most expensive property in the Los Angeles hills area. The Getty fire is reported to be threatening up to 10,000 properties at this time.

The insurance, reinsurance and insurance-linked securities (ILS) markets will be watching these fire weather developments closely, particularly those that have picked up additional property and liability premiums in the state after rates rose significantly following the high market losses from 2017 and 2018’s fires.

Fire weather conditions are expected to remain dangerous through the next two days, but there are no real forecasts of rain or moisture returning for around ten days, meaning that the dry Californian countryside will remain a significant fire risk.

The forecast for Tuesday into Thursday suggests that the Los Angeles area could see some of its strongest winds in years, which may fan the flames of the Getty and Tick wildfires, while also increasing the risk of more fires breaking out.

Bloomberg has reported that analyst and economic damage modeller Chuck Watson from the Enki Research Centre in Savannah, Georgia, told them he believes as much as $25 billion of damages may already have been caused by these wildfires.

Watson said his models show over $25 billion of properties within or in the immediate vicinity to the burn zones of these wildfires, with the Kincade fire estimated to be at close to $10.6 billion of costs, while the economic losses in Southern California from the Getty, Saddleridge and Tick wildfires could be approaching $14.8 billion.

This data is based on analysing the values at risk in the burn and fire extent areas, but they give a rough approximation of how costly the current wildfire outbreak could already be.

With Southern California forecast to see the strongest Santa Ana winds of the season so far over the next two days, the risk of further blazes and increasing insurance and potentially reinsurance related costs are clear.

Power has been shut off to hundreds of thousands more California residents as a precaution with the two days of dangerous wildfire weather ahead.

The National Weather Service said:

There is increasing confidence of a strong and damaging Santa Ana wind event late Tuesday evening through Thursday. The peak of the wind event is expected to be Wednesday when damaging wind gusts between 50 and 70 mph will be likely for the wind prone areas of Los Angeles and Ventura counties, with isolated gusts to 80 mph in the mountains. This Santa Ana wind event will likely be the strongest we have seen so far this season. These strong winds combined with a long duration of single digit humidities (including very poor to no recoveries Wednesday night) and dry fuels will likely bring very critical fire weather conditions, making this an extreme Red Flag Warning event.

The strong Santa Ana wind event coming from Tuesday evening local time means firefighters at least have the day to make more headway in containing wildfires, before critical weather is likely to make fighting them more dangerous again and fires are likely to spread and any fresh outbreaks burn out of control.

Insurance, reinsurance and ILS interests continue to watch this California wildfire activity closely, as no matter how much rates rose by at renewals this year they are unlikely to come close to covering loss costs should a repeat of recent years wildfire damage occur in 2019.

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