Zinger Key Points
- California faced an insurance crisis before the fires began, as insurers were already fleeing the state.
- Many homes in the affected areas are insured by the state-backed insurer of last resort, the California FAIR Plan.
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Wildfires continue to ravage Los Angeles county on Thursday, causing billions of dollars in damage to homes and businesses.
What To Know: Accuweather on Wednesday issued a preliminary estimate of the total damage and economic loss from the Southern California wildfires to be between $52 billion and $57 billion.
More than 2,000 structures have been damaged or destroyed and additional damages are expected as red flag warnings continue through Thursday.
Five fires continue to burn in Los Angeles County on Thursday, with officials reporting the Palisades fire and the Eaton fire remain at zero containment, according to the Los Angeles Times.
"This is already one of the worst wildfires in California history. Should a large number of additional structures be burned in the coming days, it may become the worst wildfire in modern California history based on the number of structures burned and economic loss," AccuWeather Chief Meteorologist Jonathan Porter said.
California Insurance Industry: California faced an insurance crisis before the fires began, as insurers were already fleeing the state due to massive losses caused by larger and more frequent wildfires.
Actor James Woods highlighted the problem in a social media post, saying that a major insurance company had recently canceled the policies in his neighborhood.
Many homes in the affected areas are insured by the state-backed insurer of last resort, the California FAIR Plan. The plans are more expensive and provide less coverage than traditional private plans.
Tim Zawacki, an insurance sector strategist at S&P Global Market Intelligence, told The New York Times the number of homes in the ZIP code affected by the Palisades fire that are enrolled in the FAIR Plan has nearly doubled over the last year.
Experts are concerned the destruction caused by the ongoing fires could exacerbate the insurance crisis in the state. Equity analysts are forecasting potential insurance industry losses of between $6 billion and $13 billion, according to Reinsurance News.
Some of the largest property insurers in California include Allstate Corp. ALL and The Travelers Companies, Inc. TRV.
BMO Capital Markets analysts estimate that at around a $3.5 billion insured loss, the fires could add risk to first-quarter earnings per share estimates for reinsurers, per Reinsurance News.
The analysts added that a loss of more than $7 billion, would affect first-quarter earnings results across the insurance and reinsurance sector.
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