LA Wildfires’ Economic Toll Hits $50 Billion, Doubling Early Estimates

The Wall Street Journal reported on Thursday that JP Morgan estimates the economic losses from the LA wildfires have soared to $50 billion, doubling previous projections. Insurance companies are expected to bear over $20 billion of these losses, with the total number potentially climbing further. Meanwhile, Morningstar DBRS reports that insurance claims alone have exceeded already exceeded $8 billion.

The final insurance loss tallies from natural disasters often diverge significantly from initial estimates, as analysts calculate potential costs based on previous fire damages.

For context, the 2018 Camp Fire in northern California holds the record for the most destructive U.S. wildfire, causing $12.5 billion in damages, according to insurance broker Aon.

Experts suggest the financial toll of this LA wildfire could rival other catastrophic natural disasters. Hurricane Katrina, which devastated New Orleans and the southeastern U.S. in 2005, remains the costliest natural disaster, with inflation-adjusted damages of $102 billion. Hurricane Ian in 2022 ranks second at $56 billion, followed by the 2011 Great East Japan Earthquake at $48 billion.

The LA wildfires are expected to severely impact California’s insurance industry, which is already financially strained by payouts from previous wildfires. Moody’s senior analyst Denise Lapmond predicts, “Increased recovery costs will likely drive up premiums and may reduce property insurance availability.”