Northern California wildfires to be costliest in US history: FitchReprints
Last month’s California wildfires will be the costliest wildfire loss in U.S. history, U.K.-based Fitch Ratings Ltd. said Thursday, citing insured loss estimates of $8 billion.
While Fitch said it does not expect any of the insurance or reinsurance companies that it rates to be downgraded solely as a result of the wildfire losses, many companies will be also handling other substantial third-quarter 2017 losses.
“Adding the California wildfires to hurricanes Harvey, Irma and Maria,” Fitch said in a statement, “will make 2017 one of the costliest catastrophe loss years in U.S. history, with insured losses reaching $70 billion-$100 billion according to various estimates.”
In some instances, Fitch said, insurers could ultimately report aggregate 2017 catastrophe losses at levels that strain capital and pressure ratings.
The latest insured loss estimate from Aon Benfield is $8 billion, Fitch said, but the overall economic losses are considerably greater.
California’s North Bay wildfires in October spread over 245,000 acres, with Napa, Sonoma, Mendocino, Lake, Solano, Butte and Yuba counties seeing the worst damage. Fitch said that the most up-to-date information reports 43 fatalities and 185 injuries, with nearly 9,300 structures damaged and 8,560 destroyed.
To date, Fitch said, the California Department of Insurance has reported that 19,000 residential, commercial and auto claims have been filed, with payouts exceeding $3.3 billion.
Fitch said the expected loss from the October wildfires will eclipse past California wildfires.
In comparison, Fitch said, the 1991 Oakland Hills wildfire reported a $2.7 billion loss (inflation adjusted through 2016) from 25 deaths and 2,900 structures destroyed.
Last year's wildfire in Fort McMurray, Alberta, was Canada's largest wildfire, spreading across 1.15 million acres, destroying about 2,400 homes and buildings and generating $3.7 billion in insured losses.
Commercial insured losses from the third-quarter fires will include property, business interruption and crop business, Fitch said. Business interruption losses will take longer to determine and settle with insurers but are expected to remain a moderate portion of total insured losses. Ten of the 1,200 California wineries were reported destroyed or heavily damaged. According to the Wine Institute, 90% of the year's grapes had already been harvested at the time of the fires.
Separately, Boston-based catastrophe modeling firm AIR Worldwide updated its loss estimates for the California wildfires to a range of $8 billion to $10.5 billion.
On Oct. 26, AIR released an estimate of $2 billion to $3 billion.
AIR said in a statement Thursday that it released the updated estimates after analyzing findings from its damage survey conducted during the week of Oct. 30, along with new information about policy terms, and a re-examination of the replacement values of high-value homes within its industry exposure database.
AIR said its loss estimates represent damage to residential, mobile home, commercial and automobile lines of business, as well as direct business interruption losses.
The estimates include demand surge, or increases in rebuilding costs that result from shortages of labor and materials, but do not consider extra expenses such as debris removal.
Losses to vineyards and wineries remains uncertain, AIR said. While AIR does not expect losses to wineries and vineyards to constitute the major part of the losses from these fires, the value of the equipment, machinery and inventory at the wineries may exceed the contents values in the firm’s industry exposure database.