As the number of properties destroyed by the recent Camp and Woolsey Wildfires in California reaches 20,152, re/insurance broker Aon has claimed that the total economic impact is likely to “minimally exceed US $10 billion; likely higher,” with a majority of these losses covered by re/insurers.
While Aon stipulated that it was still too early to provide a specific economic or insured loss estimate at this time, its assessment falls within the range recently provided by catastrophe modeller RMS, who said that insured losses from the wildfires would be between $9 billion and $13 billion.
Most of the destruction was caused by the Camp Wildfire in Butte County, which has now destroyed 13,631 single residences, 275 multiple residences, 514 commercial properties, and a further 4,232 minor structures, according to the latest data from the California Department of Forestry and Fire Protection (Cal Fire).
The Camp Fire became the most destructive and deadliest wildfire in California’s history after completely devastating the town of Paradise on November 8, causing 84 deaths at present count, with 52,000 people evacuated and hundreds still unaccounted for.
It has burned through 153,336 acres, but containment has now reached 95% and no further structures are in danger. Nevertheless, the level of destruction is likely to continue to rise over the coming days as the process of assessing the damage gets underway, rather than due to fresh burns.
Further south, in California’s Ventura and Los Angeles Counties, the Woolsey fire is now completely contained after destroying 1,500 structures, damaging 341 more, causing three deaths, and burning through 96,949 acres.
The quick-moving blaze resulted in the evacuation of some 265,000 people and damaged many high-value properties around the Malibu area, including dozens of celebrity homes and several filming and historical sites.
Aon said that the scope of the confirmed damage so far indicates that the financial cost from the Camp and Woolsey Wildfires will comfortably exceed $10 billion, with re/insurance industry losses “reaching well into the billions of dollars.”
By comparison, the collective destruction caused by the Tubbs, Nuns, Atlas and Thomas Wildfires in October and December 2017 are estimated to have driven somewhere around $13 billion in insured losses.
Given that the combined total of properties destroyed by this recent outbreak is far higher than the total from the 2017 fires, current industry loss estimates be prove to be too low.
Auto and vehicle losses from the wildfires also remain uncertain at present but are sure to drive further losses for the insurance and reinsurance industries, in addition to business interruption, contents claims and additional living-expense claims for those who have lost their homes.
Aon noted that 2018 will be the second consecutive year in which economic damage from wildfires surpasses $10 billion, and just the second year since 1950 to surpass this threshold.
With this in mind, Morgan Stanley recently said that property and casualty (P&C) re/insurers may have to raise their prices and reduce their risk appetite for this peril, while reassessing their approach to modelling wildfire risk.
However, Aon maintained that the re/insurance industry remains “well positioned” to handle another year of severe wildfire losses, estimating that there was roughly $605 in available capital at the end of June 2018.
Equipment belonging to energy supplier Pacific Gas and Electric Company (PG&E) still remains under scrutiny as a potential cause for the Camp Wildfire, and the company will likely erode all of its $1.4 billion of insurance protection if found liable, including its $200 million Cal Phoenix Re catastrophe bond.
A.M. Best noted that many re/insurers could also face additional exposures in the event of a PG&E bankruptcy, as the industry is heavily invested in the utility’s bonds.