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The severe wildfires sweeping through Los Angeles are now projected to inflict up to $30 billion in losses on the insurance sector, nearly a week after they first erupted. This new estimate from analysts at Wells Fargo & Co and Goldman Sachs Group Inc significantly exceeds earlier predictions.
Just last week, JPMorgan Chase & Co had estimated the damage at about $20 billion. Home-insurance providers are expected to bear the majority of the costs, with Allstate Corp, Chubb Ltd, American International Group (AIG), and Travelers Cos identified as the most vulnerable insurers, according to a report from Wells Fargo on January 12. Other insurers, including Mercury General Corp and Cincinnati Financial Corp, are also at considerable risk, although they were not part of the bank’s evaluation.
Global property and casualty insurers, in addition to their US counterparts, are starting to grasp the scale of the damage. Tokio Marine Holdings Inc, based in Japan, is taking steps to accelerate claims processing for affected individuals. However, President Satoru Komiya noted that it is still too soon to determine the overall impact on the insurer’s business results.
According to Bloomberg Intelligence analyst Steven Lam, Tokio Marine, along with other Japanese firms like MS&AD Insurance Group Holdings Inc and Sompo Holdings Inc, is collectively liable for around 3% of the insured damages resulting from the fires.
The conditions in Los Angeles are critical, with increasing wind gusts exacerbating the fires and making it difficult for firefighters to control the situation. So far, at least 24 fatalities have been reported, and more than 12,000 structures have been destroyed across over 40,000 acres in areas such as Pacific Palisades and Altadena.
Analysts at Goldman Sachs now project that insured losses will range from $10 billion to $30 billion, while total damages, including uninsured losses, could reach up to $40 billion. Furthermore, the fires are anticipated to adversely impact U.S. nonfarm payroll growth in January, possibly leading to a decrease in job growth by 15,000 to 25,000, based on their analysis. As of Monday, the Palisades and Eaton fires are still mostly out of control, with officials actively working to contain them.