Verisk estimates $28-$35 billion insured property losses from LA fires

Investing.com -- Global data analytics firm Verisk (Nasdaq: NASDAQ:VRSK ) has projected insured property losses from the Palisades and Eaton (NYSE:ETN ) fires to be between $28 billion and $35 billion, marking one of the highest loss estimates from the industry. The Palisades fire, situated between Santa Monica and Malibu on Los Angeles' western flank, is estimated to result in losses ranging from $20 billion to $25 billion. The Eaton fire, located near Pasadena in the east, could lead to losses between $8 billion and $10 billion.

The two fires are already considered the most destructive in Los Angeles' history. The disaster is expected to generate catastrophe-related claims worth billions of dollars for U.S. and European insurers, making it likely the most expensive ever in California. Citi had previously warned that Europe's big four reinsurers – Munich Re, Swiss Re (OTC:SSREY ), Hannover Re (OTC:HVRRY ), and Scor (EPA:SCOR ) – will have used up around a third of their 2025 natural catastrophe budgets in the first two weeks of the year.

The fires in Los Angeles, which have destroyed hundreds of homes and stretched firefighting resources and water supplies to the limit, mark another blow to insurers' catastrophe claims budgets. These insurers have been grappling with rising catastrophe claims from several wildfires and other natural disasters over the past few years.

The Extreme Event Solutions group at Verisk estimates that most of the losses are to residential risks. The areas impacted by the Palisades fire include some of the highest property values in the country, with policyholders having considerable contents exposure, including jewelry, fine art, and other luxury goods.

Verisk's loss estimates do not include losses from smoke damage, the Hurst fire or other fires during this past month other than Palisades and Eaton, losses exacerbated by litigation, fraudulent assignment of benefits, or social inflation, losses from guaranteed replacement cost coverage, losses from ordinance or law coverage, losses to uninsured properties, losses to infrastructure, losses from extra-contractual obligations, losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event, and loss adjustment expenses.

On January 2, Verisk announced that it was the first modeler to request a review of its U.S. Wildfire Model as part of California Insurance Commissioner Ricardo Lara’s, 'first of its kind' catastrophe modeling and ratemaking regulation, a central part of his Sustainable Insurance Strategy. As of January 16, Verisk’s petition for model review has been granted by the CDI. This marks the commencement of the next step and formal review. The use of catastrophe models in California is expected to provide consumers, insurers, and regulators with enhanced insights into natural disaster risks and increased insurance availability across the state.

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Source: Investing.com