As the scope of damage from the California wildfires continues to expand, it’s becoming increasingly likely that insured losses will fall in the upper limit of, or exceed, the latest $9 billion to $13 billion RMS estimate, according to analysis by Goldman Sachs.
Most of the destruction was caused by the Camp Wildfire in Butte County, which has now destroyed 13,503 single residences, 275 multiple residences, 514 commercial properties, and a further 4,404 minor structures, according to the latest data from the California Department of Forestry and Fire Protection (Cal Fire).
Further south, the Woolsey Fire, which continues to burn through the Ventura and Los Angeles Counties, has now destroyed 1,500 structures and damaged another 341, many of which are in the affluent region of Malibu and include buildings and locations used in the film and television industries.
The Woolsey Fire has burned through 96,949 acres, but is now 96% contained and does not currently pose a threat to any more structures, according to California authorities.
Goldman Sachs expects insured losses to be an earnings event for its coverage names, more geared to primary insurers compared to the Q42017 wildfire losses.
Analysts also say the magnitude of reinsured losses will depend on the ultimate losses incurred by the fire (larger losses will likely result in more breaches of aggregate attachment points) and on whether the fires are considered to be one event or multiple events.
Not all homes are insured or covered for the full repair/replacement cost. Given the magnitude of damage, analysts expect a large number of displaced insureds to require alternative accommodations for an extended period of time, and many homeowners policies cover those costs.
Furthermore, given the extent of the damage, demand surge will likely increase the costs of temporary accommodations as well as labour and material costs once rebuilding begins. Also, this estimate does not include commercial losses and business interruption.
Goldman Sachs adds that the extent of reinsurance protection will be determined by the details of the treaties, to which the firm is not privy. These details include hourly and geography clauses, that may determine the number of reinsurance events emanating from the fires.