The insurance market could face losses of up to the region of ~$4 billion from the recent devastating wildfires that struck the Hawaiian island of Maui, according to catastrophe risk modelling specialist Moody’s RMS.
The company brings together the most impactful of the wildfires on Maui, the Lahaina Conflagration that destroyed the historic coastal town, with the Kula wildfires which burned upcountry.
Together, Moody’s RMS estimates that the economic loss from these wildfires will be in a range from $4 billion to as much as $6 billion.
This estimate includes costs related to property damage, contents, and business interruption, across residential, commercial, industrial, automobile, and infrastructure assets.
Overall, Moody’s RMS expects that approximately 75% or more of the economic damages from the wildfires on Maui will be covered by insurance, given that wildfire is a covered peril under normal insurance policies and the island has high insurance penetration rates.
Moody’s RMS points to the estimate that around 2,200 structures were destroyed by the wildfires and says that it estimates the burn footprints for the Lahaina and Kula wildfires included insured property value in the range of $2.5 to $4 billion.
The company also points to the potential for the insurance industry loss to be higher, given certain extenuating factors.
“Post-event loss amplification is expected to be high in this event due to the island effect on supply chains, high construction labor costs in general, inflationary impacts during the expected long recovery time, and potential ordinance and law requirements,” explained Rajkiran Vojjala, Vice President Modeling, Moody’s RMS.
Commenting on the conditions that drove the wildfires to become extreme, Michael Young, Vice President, Product Management, Moody’s RMS, said, “When the rare situation of high wind and wildfire ignitions do occur again in the future, we need to be sure all the buildings comply with scientifically proven risk reduction features highlighted in programs such as the Wildfire Prepared Home program from Insurance Institute of Business and Home Safety.”