Out-of-control wildfires burning across the Los Angeles area continued Friday morning, destroying at least 10,000 structures and causing estimated fire damage over $150 billion. Meteorologists have issued warnings for "critical red flag" conditions throughout the day, signaling that fire damage to homes and businesses will broaden into the weekend.
Insurance companies are bracing for the worst-case scenario as analysts at JPMorgan said Thursday that insured losses could top $20 billion.
JPM's Jimmy Bhullar said insured loss estimates could be revised even higher "if the fires are not controlled."
Bhullar said losses would be "confined mostly" to homeowners insurers like Allstate, Travelers, and Chubb, but noted that commercial property insurers like American International Group and Kinsale Capital Group could also be exposed.
Shares of Allstate dropped 5% in premarket trading, while Travelers fell 4%, Chubb -4%, AIG -3.5%, and Kinsale -1%.
Shares in Mercury General, whose insurance organization is mostly centered in California, crashed 35% in premarket trading. About 80% of its premiums of $4.6 billion in 2024 were derived from the state, making it one of the most exposed insurers to the LA County fire.
"This would make this event significantly more severe than the 2018 Butte County Camp Fire, the highest insured-loss wildfires in California's history previously," with insured losses of roughly $10 billion, the analysts said.
In a separate note, RBC Capital Markets' Scott Heleniak wrote, "We think these could be among the most expensive wildfires in U.S. history," adding the estimated insured losses so far could easily exceed $20 billion.
The latest AccuWeather estimate for the total damage and economic loss in LA County has surged to a staggering $135 billion to $150 billion, a massive increase from Wednesday's estimate of $52 billion to $57 billion.
As of Friday morning, five separate fires were raging in the LA County area. Containment levels are very low.
Catosphere bond news website Artemis noted, "We are still a long way off any loss estimates based on actual damage information, given the still-unfolding disaster situation in Los Angeles County."