By Manya Saini
(Reuters) – U.S. insurance stocks slid on Friday as analysts estimated insured losses from the wildfires menacing Los Angeles could reach as high as $20 billion, potentially making it the costliest disaster in California’s history.
A pause in the fierce winds that super-charged the ring of wildfires that devastated Los Angeles this week helped crews make progress in bringing the infernos under control but forecasters said strong gusts could return over the weekend.
Analysts are evaluating the financial impact of the disaster, with J.P.Morgan doubling its forecast of insured losses to over $20 billion. Wells Fargo also expects similar insured losses and said the total economic hit from the disaster could be well above $60 billion.
To help provide critical stability amid the devastation caused by the fires, California Insurance Commissioner Ricardo Lara invoked moratorium powers to suspend all policy non-renewals and cancellations from insurance companies for one year.
Lara also urged insurance companies to halt any pending non-renewals and cancellations issued to homeowners before the fires began.
“My primary concern at this very moment is to ensure that wildfire survivors receive the insurance benefits to which they are entitled to as soon as possible,” Lara said at a press briefing.
The Pacific Palisades area is one of the most expensive neighborhoods in the U.S., home to Hollywood A-Listers and multimillion dollar mansions. Ahead of this week’s disaster, its insurance costs were among the most affordable in the country, according to a Reuters analysis.
But that is likely to change after the scale of losses anticipated in the wildfires now ringing Los Angeles, as well as regulatory changes enacted late last year.
“While leading U.S. property insurers are in good financial condition, the California property insurance market has been challenging… leading many insurers to re-think their product offering, including an outright exit from the market,” Morningstar DBRS wrote in a client note.
The S&P Insurance Select Industry index was last down 3.2% on Friday.
MOUNTING LOSSES
The fires, engulfing iconic Los Angeles neighborhoods and tearing through the Hollywood Hills, have so far killed 10 people and destroyed nearly 10,000 structures.
Private forecaster AccuWeather estimated the damage and economic loss at $135 billion to $150 billion, portending an arduous recovery and a surge in homeowners’ insurance costs.
“It will take weeks or months to determine the magnitude of the insured damages, but the Los Angeles wildfires are likely among the most costly wildfires in the state’s history,” Moody’s Ratings said in a note.