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The devastating wildfires that affected Southern California last week could result in guaranteed losses of more than $30 billion, according to a new analysis.
At least 24 people have died in wildfires in the Los Angeles metropolitan area, and authorities say at least 12,000 structures have been damaged or destroyed.
Financial analysts at Wells Fargo Securities released a report to clients on Sunday saying the “base case” for insured losses from wildfires is $30 billion, with total losses ranging from $20 billion to $40 billion. He added that it may fall within the range of
A Wells Fargo analysis found that about 85% of these losses were from homeowners insurance policies, 13.5% were for commercial property, and 1.5% were for personal auto losses. The base case notes that the average property value in wildfire-affected areas is in the range of approximately $3 million.
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Destroyed homes are photographed from above as the Palisades Fire continues to burn in Pacific Palisades, California, on January 9, 2025. (Tama Mario/Getty Images/Getty Images)
“Regardless of the outcome, we see this as a manageable event for insurers,” Wells Fargo analysts said. They pointed out that total insurance losses of $40 billion would represent a 2% hit to capital for insurance companies.
In the base case of $30 billion in insured losses, $25.5 billion of that would come from homeowners insurance policies, compared to $4.05 billion from commercial lines and $450 million from auto lines. . In that case, the impact on stocks would be smaller at 1.6%.
Analysts at JPMorgan last week issued a preliminary estimate that insurance losses would reach $20 billion. This number, similar to Wells Fargo's estimate of $30 billion, would make Southern California's wildfires the most costly in the state's history.
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A chimney stands amidst rubble after the Palisades Fire passes through on January 8, 2025 in Pacific Palisades, California. (Agustin Pourier/AFP via Getty Images/Getty Images)
Whichever estimate comes to pass, this month's wildfires would be the deadliest in California history, surpassing the 2018 Camp Fire, which caused about $10 billion in insured losses.
The Camp Fire affected the Northern California town of Paradise and several nearby communities, killing 85 people and affecting more than 18,000 buildings.
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Khaled Fuad (left) and Mimi Lane (right) inspect their family's property destroyed by the Eaton Fire on January 9, 2025 in Altadena, California. (Justin Sullivan/Getty Images/Getty Images)
The structure of insured losses from the Camp Fire detailed by JPMorgan was similar when compared to the ongoing Southern California wildfires analyzed by Wells Fargo.
JPMorgan's report notes that about 86% of losses were for personal property, compared to 12% for commercial real estate and 2% for all other insurance and auto insurance. did. He added that because the Southern California fires are impacting large population centers, insured losses are expected to be even higher as a result.
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