Los Angeles wildfires set to become costliest disaster in US history, estimating $50 billion

Historic blazes ripping through Los Angeles County are poised to become the costliest wildfires in U.S. history, with economic losses approaching $50 billion amid unprecedented January fire conditions and hurricane-force winds.

The fires, which have already claimed five lives and destroyed over 1,100 structures, could inflict more than $20 billion in insured losses alone, according to JPMorgan analyst Jimmy Bhullar. The staggering projection doubles previous estimates and surpasses the inflation-adjusted $12.5 billion in insurance claims from California’s devastating 2018 Camp Fire.

The trio of major fires – Palisades, Eaton, and Hurst – have consumed more than 21,500 acres collectively. The Palisades Fire has burned through exclusive neighborhoods on Los Angeles’s west side, while the 10,000-acre Eaton Fire northeast of Pasadena has claimed two lives and forced mass evacuations.

“A dangerous fire weather event is currently unfolding in portions of Southern California,” the Weather Service’s Storm Prediction Center warned as winds gusted to nearly 90 mph.

The timing of the fires presents an unprecedented challenge. “To have almost no precipitation at this point in the year is very unusual for us,” said Alex Hall, a climate scientist at UCLA. “Typically, we have our first rains in November.”

The disaster threatens to destabilize California’s already fragile insurance market. “The fires will have widespread, negative impacts for the state’s broader insurance market,” said Denise Rappmund, senior analyst at Moody’s Ratings. She warned that costs “will likely drive up premiums and may reduce property insurance availability.”

Of particular concern is the state’s Fair Plan insurer of last resort, which had nearly $6 billion in exposure in Pacific Palisades alone as of September. Victoria Roach, the Fair Plan president, had presciently warned state officials in March that “we are one [big fire] event away from a large assessment.”

While falling short of Hurricane Katrina’s record $102 billion in inflation-adjusted insured losses, the fires could rival 2022’s Hurricane Ian ($56 billion) as one of the costliest U.S. natural disasters on record.

The crisis shows no signs of abating, with the National Weather Service forecasting “extremely critical” fire conditions through Thursday. Over 375,000 customers have lost power, including 75,000 cut preventatively by Southern California Edison to reduce fire risk.