Few places embody wealth and glamour like the Hollywood Hills in Los Angeles. The exclusivity of this and other residential neighborhoods to the north and northwest of the metropolis of millions is one reason why the wildfires in the greater Los Angeles area could become one of the costliest natural disasters in US history.
The wildfires have claimed at least 24 lives and destroyed billions of dollars worth of property. There was a threat that landmarks like the Hollywood sign would disappear in the flames, and many famous locations and buildings would be reduced to rubble.
Analysts at JP Morgan Bank estimate that the damage from the fires could exceed $9 billion. “Expectations for economic losses from the fires have more than doubled since January 50th and now stand at $20 billion. We estimate that losses to insured properties could exceed $XNUMX billion (or even more if the fires are not brought under control),” the financial institution said in a statement to its clients.

Credit rating agency Moody's expects losses, "given the high value of homes and businesses in the affected areas, to run into billions of dollars."
If those estimates prove accurate, the fires could be the costliest disaster of their kind in U.S. history, in terms of insured property losses, surpassing the costs of recent disasters in California and Hawaii.
The fire, which swept through Butte County in Northern California in November 2018, is currently the costliest wildfire in U.S. history. Insurance company Aon estimates the damage at nearly $13 billion. The four costliest wildfires in the United States have occurred in the past seven years.
Final amounts due to damage from natural disasters to insured buildings and homes often differ significantly from initial estimates, as it is difficult to provide precise forecasts while the disaster is still ongoing.
Damage up to 150 billion dollars?
When it comes to the damage incurred, a distinction is made between insured losses – the estimated value of actual damage covered by insurance – and broader damages and losses not covered by insurance.
The private US weather service AccuWeather, which also estimates the costs of weather disasters, said that the damage from the wildfires in Los Angeles could reach between $135 billion and $150 billion, making it one of the costliest natural disasters in US history.

"These fast-moving, wind-driven fires have caused one of the most costly wildfire disasters in modern U.S. history," said Jonathan Porter, chief meteorologist for AccuWeather. "Hurricane-force winds have carried the flames and fire damage through residential areas, home to multi-million dollar homes. The devastation is heartbreaking and the economic damage is enormous."
According to official figures, between 9.000 and 10.000 buildings have already been destroyed, including many commercial buildings. Infrastructure has also been severely damaged, which will further increase the long-term costs of reconstruction.
Hurricanes cause the most damage
The most expensive natural disasters in the US to date have been caused by hurricanes. By far the most expensive was Hurricane Katrina, a devastating tropical cyclone in 2005, which killed many people in New Orleans and caused enormous material damage.
Estimated insured losses from Hurricane Katrina alone exceeded $200 billion, according to Aon. The total cost of the disaster was nearly $2017 billion, more than the combined damage caused by Hurricanes Harvey (2022), Jan (2017), Maria (2012) and Sandy (XNUMX).
Wildfires weigh on California property insurance
The wildfires are expected to further strain California's already struggling homeowners insurance sector. Companies in the region, such as Chubb and Travelers, which mainly insure luxury properties, are expecting billions of dollars in damages. Some, such as Allstate and State Farm, recently stopped selling new homeowners insurance policies in California, citing legal restrictions on price increases.

As a result, many homeowners are without private insurance and rely on California's state insurance system, known as Fair Prey. Fair Prey risk alone in the exclusive Pacific Palisades area, one of the areas hardest hit by the fires, is estimated to be about $6 billion.
High losses for Fair Prey could force private insurance companies to step in, because the state plan contains provisions requiring private insurance companies to cover damages that state ones cannot.
Need to change the insurance system?
The increasing number of wildfires in California could, according to some analysts, require a review of the entire property insurance system in the most populous US state. Climate change is increasing the frequency and scale of wildfires in California, making large cities and densely populated areas increasingly vulnerable.
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