The Carr wildfire, which hit Shasta county in Northern California last week, has claimed at least six lives and destroyed or damaged more than 1,000 structures, and continues to spread despite efforts to contain the blaze.
The fire more than doubled in size over the weekend, driven by strong winds and dry conditions, and has now consumed roughly 95,368 acres, an area larger than the size of San Francisco.
With 5,000 buildings still under threat and seven other major wildfires currently burning in California, experts say that this may be the worst start to the state’s wildfire season in ten years.
In the wake of heavy 2017 catastrophe losses, the insurance, reinsurance, and insurance-linked securities (ILS) fund sectors will be closely watching the developments of the Carr fire, which is already considered one of the most destructive wildfires on record.
Thousands of firefighters are currently working to tackle the blaze, with 17% of the fire now reportedly contained, but its rapid spread continues to threaten thousands of homes and has already led to the evacuation of around 38,000 people across the county.
The severity of this season’s wildfires have been attributed to the historic 2012-2017 drought, which, in combination with unusually hot, dry weather in recent weeks, has resulted in a dangerous abundance of dead, combustible vegetation.
Estimates suggest that thus far, 657 residential structures have been destroyed with another 145 damaged, while 3 commercial structures have been destroyed and 4 damaged, and 214 others have been destroyed with 26 damaged.
In terms of structures destroyed, the Carr fire remains far behind last years’ wildfires, but it has come at an early stage in the season, and the prevailing dry conditions in California warn of the potential for another impactful year for re/insurers.
Analysts at KBW have predicted that primary insurers will likely cover the majority of the losses from the Carr wildfire, but if the fire continues to spread or others break out, reinsurance contracts will increasingly come into play and aggregate deductibles may begin to get eroded.
Insurers most exposed to wildfires in California include State Farm, Liberty Mutual, Allstate, Nationwide Mutual, Travelers, Chubb and USAA, all of which are users of collateralised sources of reinsurance capacity.
The California Department of Insurance (CDI) has also suggested that evacuation costs may be covered by insurance policies, explaining: “Thousands of residents forced to evacuate may have homeowner or renter insurance coverage to help with evacuation and relocation costs, even if their homes are not damaged or destroyed, and in many cases no deductible is required.”
Insurance Commissioner Dave Jones added: “These fires are exacting a devastating monetary and emotional toll on residents across the state and it is imperative that they are aware of every resource available to them to repair and rebuild.
“Insurance coverage is meant to protect consumers from the devastating financial effects of wildfires and other disasters. I encourage evacuees to contact their insurance agent or the Department of Insurance for assistance.”
The six confirmed fatalities from the Carr fire include two firefighters, two young children and their grandmother, and one unidentified body.
State authorities believe that the cause of the wildfire may have been due to the mechanical failure of a vehicle.
