The fires that have been raging since Tuesday are described as the most devastating in California history. Thousands of properties – homes, businesses, schools, churches and other buildings – have burned to the ground.
Worst hit are celebrity-dense Pacific Palisades, where an average home costs around SEK 40 million, as well as Altadena and Pasadena in the northeast. Even West Hollywood, with its classic hotels and buildings, is affected.
And the costs of the devastation are almost unmanageable.
Credit rating agencies expect that insured losses will amount to several billion dollars. But many houses are likely to be uninsured.
Weather site AccuWeather have appreciated the total costs of the damages and other losses to just over SEK 1,500 billion, but the final sum is still difficult to predict.
Increased insurance costs
The extensive fires are now fueling the insurance crisis in the state, where in recent years it has become increasingly difficult to insure one’s home.
Insurance companies have withdrawn from areas they consider to be at high risk of forest fires. Such an area is precisely Los Angeles. And California has among the highest rates of “non-renewed” home insurance policies in the United States, according to the report New York Times. As recently as this summer, one of the largest companies canceled the insurance policies of hundreds of homeowners in the now affected Pacific Palisades, writes Newsweek.
“Increased reconstruction costs are likely to drive up premiums and may reduce the availability of property insurance,” Denise Rappmund, senior analyst at Moody’s, told Reuters.
Among other things, the state has tried to solve the situation through a program called California FAIR, a type of disaster insurance at a higher premium than traditional, private insurance, writes CNN. New insurance rules were also announced two weeks ago.
“A knife edge”
But there is still great uncertainty about exactly how the insurance claims and losses after the ongoing forest fires are to be financed.
According to experts, there is now a risk that more insurance companies will leave.
– The California insurance market is balancing on a knife’s edge, says insurance expert Nancy Watkins to the NYT.
“We are marching toward a future where insurance will not be available or affordable,” Dave Jones, who previously served as California’s insurance commissioner, told Washington Post.