US insurance companies fell as estimates of losses from the Los Angeles wildfires reached $20 billion

Written by Manya Saini

(Reuters) – U.S. insurance stocks fell on Friday, with analysts estimating that insurance losses from the wildfires threatening the city of Los Angeles could reach $20 billion, making it the costliest disaster in California history.

A cessation of the high winds that fueled the episode of wildfires that devastated Los Angeles this week helped crews make progress in controlling the inferno, but meteorologists said strong winds could return over the weekend.

Analysts are assessing the financial impact of the disaster, with JPMorgan doubling its insurance loss forecast to more than $20 billion. Wells Fargo also expects similar insurance losses and said the total economic damage from the disaster could far exceed $60 billion.

To help provide monetary stability amid the devastation caused by the fires, California Insurance Commissioner Ricardo Lara used moratorium powers to suspend all non-renewals and cancellations from insurance companies for one year.

Lara also urged insurance companies to halt any pending non-renewals and cancellations issued to homeowners before the fires started.

“My primary concern at this particular moment is to ensure that wildfire survivors receive the insurance benefits to which they are entitled as soon as possible,” Lara said at a press conference.

Pacific Palisades is one of the most expensive neighborhoods in the United States, home to Hollywood celebrities and multi-million dollar mansions. Before this week’s disaster, insurance costs were among the most affordable in the country, according to a Reuters analysis.

But that is likely to change following the scale of projected losses from the wildfires now surrounding Los Angeles, as well as regulatory changes enacted late last year.

“While leading U.S. property insurers are in good financial shape, the California property insurance market is facing challenges… prompting many insurers to rethink their product offerings, including exit completely out of the market. .

The S&P Insurance Select Industry Index fell 3.2% on Friday.

Increasing losses

The fires, which swept through famous Los Angeles neighborhoods and destroyed the Hollywood Hills, have killed 10 people so far and destroyed nearly 10,000 buildings.

Private weather forecasting firm AccuWeather estimated damage and economic losses at between $135 billion and $150 billion, portending a tough recovery and higher homeowners insurance costs.

“It will take weeks or months to determine the extent of insured damage, but the Los Angeles wildfires are likely to be among the costliest wildfires in the state’s history,” Moody’s, a credit rating agency, said in a note.

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