The two main California wildfires that burnt in recent weeks, the Carr and Mendocino Complex wildfires, have between them already resulted in over $845 million of insurance claims, according to the local Commissioner.
The Carr and Mendocino Complex wildfires burnt through late July and August in California, resulting in more than 8,800 homes, 329 businesses, and more than 800 private autos, commercials vehicles, and other types of property being damaged or destroyed.
As a result the insurance and reinsurance industry has been expecting a hit from the recent California wildfires, and reinsurance broker Aon’s Impact Forecasting said that the Carr wildfire alone could drive $1 billion of industry losses.
More than 10,000 claims have now been filed, according to the Insurance Commissioner of California, totaling $845 million in insured losses.
“Our wildfire history tells the story of how our fire season has changed over the years from a four-month season to a year-round threat,” commented Commissioner Jones. “Over the past two decades, the frequency and severity of wildfires has increased and caused significant property damage and the tragic loss of life in the wildland-urban interface areas of the state. Even more troubling is that areas once considered not to be high risk are now being scorched by wildfires.”
The two fires now sit among the most destructive in California wildfire history. The Carr fire sits at 7th largest, while Mendocino Complex is the largest, and while the Carr fire is also the 6th most destructive on record.
CALFIRE said that out of the 20 most destructive wildfires in California history, 17 occurred after September 1st. This has led institutions to warn of the fire season to come.
“The Carr and Mendocino Complex fires not only caused staggering losses to thousands of Californians, they devastated entire communities and tragically cost many people their lives, and were among the most destructive fires in our state’s history,” Commissioner Jones added. “We should remember that the vast majority of California’s most destructive fires occurred after September 1st, and fire experts tell us that the worst fires for 2018 may still be ahead of us.”
Jones also highlighted climate risk and the role insurance can play in addressing three specific types of climate risks facing insurance companies: physical, transition and litigation risks.
“Our Trial by Fire report is an important contribution to a better understanding of how climate risk and climate change impact the insurance industry and Californians,” explained Jones. “As Insurance Commissioner, one of my responsibilities is making sure insurance companies take into account and address climate-related physical, transition and liability risks, which can have consequences for insurers’ underwriting and the investing of their reserves. I’d like to thank our partners who joined us to author this report, which provides critical information about the climate-related risks for the insurance sector and Californians and what is and should be done to address those risks.”
For the insurance sector the majority of these early season California wildfire losses are expected to be dealt with by primary insurers, while reinsurance firms and ILS funds will instead be watching aggregate contracts towards which some losses may be counting.
If the wildfire season continues to be severe, 2018 could become another wildfire year having an impact on the insurance-linked securities (ILS) market, likely through quota shares and collateralized reinsurance losses to aggregate contracts first.