LA Wildfire, Potentially the Worst Fire in US History... Damage Reaches 73 Trillion Won So Far

Insurance Losses Estimated at 29 Trillion KRW
Wildfire May Become the Most Damaging in History

As large wildfires continue to break out in Los Angeles (LA), the largest city in the western United States, projections suggest that this could become the most damaging fire in U.S. history.

On the 9th (local time), The Wall Street Journal (WSJ) reported, citing research by Jimmy Bullard, a JP Morgan analyst, that the total economic loss from this fire currently amounts to $50 billion (approximately 73 trillion KRW).

LA wildfire site. Photo by UPI Yonhap News

The day before, AccuWeather estimated preliminary damages and economic losses to be between $52 billion and $57 billion (approximately 76 trillion to 83 trillion KRW).

The wildfire that broke out in LA on the 7th has not been contained for three days, resulting in at least five deaths and thousands of buildings burned. Approximately 180,000 people were ordered to evacuate that morning. Since the largest fires, the "Palisades Fire" and the "Eaton Fire," still have a containment rate of 0%, the scale of damage is expected to increase further.

Insurance companies are facing particularly massive losses. Analyst Bullard estimated insurance losses to exceed $20 billion (approximately 29 trillion KRW) and warned that if the fire is not contained, the damage will worsen.

According to insurance brokerage firm Aon, the 2018 Camp Fire in Butte County, Northern California, which was the largest wildfire in the U.S. until last year, caused insurance losses of about $12.5 billion (approximately 18 trillion KRW) when adjusted for inflation. If current estimates hold true, this fire will surpass the Butte County Camp Fire.

Credit rating agency Morningstar DBRS estimated total insurance losses to be over $8 billion (approximately 12 trillion KRW). However, WSJ noted that since the incident is still ongoing, the final tally could differ significantly.

WSJ expressed concerns that losses from the LA wildfire could further deteriorate California’s already vulnerable insurance market. Dennis Raffmond, a senior analyst at Moody’s Ratings, predicted that "(the costs from the fire) will increase insurance premiums and reduce the availability of property insurance."

According to Aon, eight of the ten largest wildfire losses in the U.S. up to last year, adjusted for inflation, occurred in California, where LA is located. As a result, even before this fire, millions of homeowners in California faced difficulties obtaining private insurance or were confronted with double-digit premium increases. This wildfire is expected to make insurers even more cautious. Homeowners who find it difficult to obtain private insurance turn to the state-provided insurance "Fair Plan" as a last resort, but there are concerns that the plan lacks the resources and systems to handle the insurance claims that will arise from this wildfire.