A new Moody’s report shows that insurance companies will endure more wildfire losses this year.
The California insurance industry isn’t getting a year off from wildfire losses after facing a costly year in 2017. A new Moody’s Investors Service Inc. report showed that despite current losses, there will likely still be another major wildfire loss event this year.
The Carr wildfire in California has caused about an estimated $1.5 billion in insured losses.
After the California insurance industry copes with the $1.5 billion in losses likely already caused by the Carr wildfire, Moody’s cautions that these major wildfire events likely aren’t done yet. Portions of Shasta County within and close to Redding in Northern California have already been devastated. Six people have died and there has been significant property damage.
Moody’s released a property/casualty sector report, showing that the fire has already destroyed a total of about 1,555 structures – both residential and commercial. The California wildfire also damaged an additional 240 homes and structures. So far, it has burned its way through around 121,000 acres, according to California Department of Forestry and Fire Protection data.
As high as the wildfire losses have been so far, the California insurance industry is bracing for more.
“The Carr fire portends high California wildfire losses for the remainder of 2018, following almost $12 billion of insured losses for the October and December 2017 wildfires, a credit negative for California homeowners and commercial property insurers,” said the Moody’s report.
The report went on to point out that when compared to fires occurring in previous years and the number of affected insured structures, losses will likely be in the hundreds of millions or could even reach the billions mark. Cal Fire estimated that there were 1,555 structures destroyed. The average value of a structure in the affected area is $991,000. This suggests that losses will strike $1.5 billion. Moreover, the Carr fire continues to rage.
That said, the average claim size forecasts made as a result of the Carr wildfire are likely to be somewhat low compared to what the final cost will be. The reason is that because of 2017’s wildfire losses, the demand for construction in the region is quite high. As a result, prices for construction labor and materials have increased. The outcome will more than likely be even higher California insurance industry losses than what they would have been last year.