Insurance losses caused by fire are in the tens of billions of dollars. Natural conditions cause damage in the United States, the situation is more favorable in Finland.
The fires raging in Los Angeles, California are causing large insurance losses for US insurance companies.
The fires are raging in a densely populated area where the buildings are valuable.
– The damage caused by the fire is really large based on the information that was publicly available, says the legislative director of the insurance sector’s financial sector Hannu Ijäs.
US newspaper The Financial Times news giant bank JPMorgan’s initial estimates, according to which insurance losses will rise to more than 20 million dollars. Weather company AccuWeather evaluatethat the economic losses caused by wildfires will rise to 150 billion.
Ijäs refers to publicly available information, based on which some insurance companies would have partially withdrawn from the area.
Insurance companies hedge in the fire zone
In California, the companies focused on insuring expensive apartments have not been eager to issue insurance before the fires, or the premiums will rise. They write about it, among other things The Financial Times and The Guardian.
The Guardian describes that after the fires, many people who lost their homes are faced with a new worry about whether they will receive compensation from the insurance at all.
Ijäs says that one of the reasons for the companies’ concern is the wildfire risk, which is estimated to be higher than before. Compared to Finland, the risks caused by natural conditions are second class in the United States.
– Forest fires are a big problem there on the west coast. Then there are tornadoes in the Midwest and hurricanes in the direction of the Gulf of Mexico, Ijäs lists.
The concentration of settlements on the coast near the sea also increases the risk. The concentration of the population in regions with difficult natural conditions increases the difficulty factor.
– This fire situation is certainly not the first time that there have been challenges from the point of view of insurance and insurance companies.
Is the situation reflected in insurance prices in Finland?
Will the gigantic insurance losses in the United States later be reflected in insurance prices in Finland?
California’s current predicament does not cause immediate effects, Ijäs estimates. Companies that insure households often operate locally.
Indirect effects of fire damage can arise through reinsurance. With them, the insurer transfers part of its liabilities to another company, i.e. the reinsurer.
– If this has an effect on the result, risk-bearing capacity or risk assessment of globally operating reinsurance companies, it can of course be reflected in Europe at some point.
Finland’s risks are related to floods and the sea
The natural conditions affecting insurance are moderate in Finland compared to other corners of the world.
Ijäs says that the sea level temporarily raised by the south wind can cause water damage to properties on the Finnish coast. Another risk is related to occasional river and urban flooding.
– Climate change also increases damage caused by natural phenomena here, and of course companies must prepare for that, Ijäs states.