California wildfires: Insured losses could exceed $30B, Wells Fargo analysis finds
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Last week’s devastating wildfires in Southern California could cost more than $30 billion in damages, according to a new analysis.
At least 24 people have died in wildfires in the Los Angeles area, and officials say at least 12,000 buildings have been damaged or destroyed.
Financial analysts at Wells Fargo Securities said in a report to clients on Sunday that their “base case” estimate for damage from the wildfires was $30 billion, with total losses expected to be between $20 billion and $40 billion.
Of that total, about 85% of losses are expected to come from homeowners insurance policies, 13.5% for commercial property and 1.5% for personal auto losses, the Wells Fargo analysis found. The average property value in areas affected by the wildfires is about $3 million, the foundation said.
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In an aerial view, destroyed homes are seen as the Palisades Fire continues to burn in Pacific Palisades, California on January 9, 2025. (Mario Tama/Getty Images/Getty Images)
“Regardless of the outcome, we see this as a manageable event for insurers,” Wells Fargo analysts wrote. He pointed out that the total insured loss of $40 billion represents a 2% fair loss for insurers.
Based on $30 billion in insured losses, $25.5 billion of that comes from homeowners insurance policies, $4.05 billion from commercial lines, and $450 million from auto insurance policies. That results in a small equity yield of 1.6%.
Last week, JPMorgan analysts released a rough estimate of insurance losses of about $20 billion. That figure would make Southern California’s wildfires the worst in the state’s history, according to Wells Fargo’s estimate of $30 billion.
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In the year Chimneys stand in the rubble after the Palisades Fire on January 8, 2025 in Pacific Palisades, California. (Agustin Paulier/AFP via Getty Images/Getty Images)
Both are estimated to be the costliest of this month’s wildfires in the state of California. That’s almost $10 billion in insured losses from the 2018 Campfires, surpassing the losses.
The Campfires affected the northern California city of Paradise and several nearby communities, killing 85 people in more than 18,000 buildings.
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Khaled Fouad (L) and Mimi Lain (R) inspect a family member’s property destroyed by the Eaton Fire in Altadena, California. (Justin Sullivan/Getty Images/Getty Images)
The composition of insured losses for the Camp Fire reported by JPMorgan was similar to that of the ongoing Southern California wildfires analyzed by Wells Fargo.
A JPMorgan report found that personal property losses accounted for 86% of losses, compared to 12% for commercial property and 2% for other lines and auto insurance. Because the Southern California fires affect large population centers, insurance losses are expected to be higher as a result.
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