Devastating LA fires expected to push up insurance premiums

The fires ravaging up-market Los Angeles districts Pacific Palisades and Malibu will be the most expensive ever to hit California, say experts who expect premiums to rise in a region already abandoned by many insurers.

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Analysts at JPMorgan estimated that the total cost of damage and insured damage had doubled in less than 24 hours to US$50 billion (S$68.5 billion) and US$20 billion respectively.

And the flames were still advancing on several fronts on Jan 10.

These record levels already far outstrip the 2017 Tubbs fire and the 2018 Camp fire, whose estimates of insured damage have climbed to as much as US$16 billion, sources say.

The value of the houses makes all the difference: More than 10,000 buildings have been destroyed this week, the vast majority of them homes worth an average of US$3 million.

By comparison, some 18,000 buildings were destroyed in the Camp fire in 2018, but the average house was worth only around US$500,000.

Mr David Burt, founder and director of DeltaTerra, a consultancy firm specialising in climate-related financial risks, estimates the market value of the 15,400 homes in Pacific Palisades to be close to US$13.5 billion.

Despite the high cost of the damage, experts believe insurance companies should have no problem compensating their customers.