California wildfires could cost insurers up to US$1.6 billion

Wildfires ravaging large swathes of Southern California are likely to cost insurers between US$900 million and US$1.6 billion, making them among the most expensive in the region’s history, according to Risk Management Solutions (RMS).
Of the 23 fires, the Witch Fire in San Diego has caused the most property damage so far and is likely to result in insured losses of US$600 million to US$1 billion, RMS said in a statement.
The fires have burned more than 465,000 acres of land and destroyed more than 1,600 structures since Oct. 21.
More than 27,000 buildings remain under threat, and nearly 1 million people have been forced from their homes, making it the largest ever evacuation in California and the biggest in the United States since Katrina, RMS noted.
“For many of the fires, the emergency services have either gained control or set up defences around the main urban areas, and conditions are becoming more favorable, said Don Windeler, director of model management at RMS. But several large fires are still largely uncontained and have the potential to cause severe property loss.”
The wildfires were made worse by an explosive combination of unusually strong Santa Ana winds and abundant dry fuel, RMS notes. Previous wet winters, followed by a very dry 2007 gave rise to a large quantity of surface fuel, providing a source for rapid fire spread.
Primary personal lines insurers and specialty writers for high-value properties are expected to incur most of the claims from these wildfires. “In recent years, there has been significant development in the wildlands that border urban areas, as people seek to live in a more natural environment, Windeler said. As a result, more properties are at risk from brushfires that pose a high hazard in these areas.”