California Insurers Face Potential $20 Billion Loss from Los Angeles Wildfires

Insurance companies are steeling themselves for potential losses reaching £20 billion as devastating wildfires continue to tear through Los Angeles’ most exclusive neighbourhoods, according to recent analyst projections.

JPMorgan analysts have revised their initial loss estimates upward, doubling their previous day’s forecast of £10 billion. The adjustment reflects the fires’ ongoing spread and limited containment success. The total economic impact could surpass £50 billion, with insured losses potentially exceeding £20 billion if the blazes remain uncontrolled.

Moody’s rating agency anticipates losses in the billions, citing the substantial value of affected properties and businesses. Morningstar DBRS has issued preliminary estimates suggesting insured losses above £8 billion, with approximately 10,000 structures destroyed.

Specialist insurers focusing on luxury properties face significant exposure. Companies like Allstate, Travellers, and Chubb, particularly the latter with its high-net-worth property portfolio, are most vulnerable to substantial claims in the region.

The crisis has been exacerbated by major insurers recently withdrawing from the California market. State Farm’s decision to discontinue 72,000 policies, including 69 per cent in the affected Pacific Palisades area, has forced homeowners to seek coverage through California’s state-backed Fair Plan or less-regulated insurers.

Climate change has intensified California’s wildfire seasons, while continued development in fire-prone zones has amplified insured losses. The average property value in the Pacific Palisades area exceeds £3 million, significantly higher than areas affected by previous major fires, suggesting this disaster could become one of the costliest in US insurance history.