The Insurance Industry Is Going To Be Absolutely Devastated By The Los Angeles Fires
Will the insurance industry be able to survive tens of billions of dollars in losses from the Los Angeles fires? There have been catastrophic fires in California before, but never anything quite like this. So what is going to happen to homeowners if their insurance companies go bankrupt and cannot pay? Even the ones that do not go bankrupt are really going to struggle. I have a feeling that some of them will delay payouts for an extended period of time and will deny as many claims as they possibly can in a desperate attempt to survive. In the end, it is likely that vast numbers of homeowners that were counting on their insurance companies to bail them out will be left holding the bag.
It is being projected that total economic losses from these fires could reach 150 billion dollars, and the insurance industry will be hit with approximately 20 to 25 billion dollars of those losses…
Analysts at Evercore ISI have estimated that insurance industry losses from the Los Angeles wildfires will be in the $20 billion to $25 billion range, and also expect the fires to be treated as one event which could help primary carriers reach their reinsurance coverage.
That is going to be a really tough pill to swallow.
One expert is warning that we are literally “on the edge of a major financial crisis for the insurance industry”…
“I think we’re on the edge of a major financial crisis for the insurance industry,” says Daniel Aldrich, a Northeastern professor, director of the university’s Resilience Studies Program and co-director at the Global Resilience Institute.
I agree with him.
I don’t see how the industry is going to avoid a historic crisis in the aftermath of these fires.
In particular, Politico is telling us that this “could be the final straw that breaks California’s insurance market”…
Wednesday’s firestorm in a wealthy area of Los Angeles could be the final straw that breaks California’s insurance market.
The state’s insurance market has been teetering on the edge of insolvency for years thanks to catastrophic wildfires that have driven many insurers to stop writing new policies and drop existing ones.
Insurance companies are generally well capitalized, but there is only so much they can take.
I think that it is probably inevitable that some insurers will not make it, and that would be extremely bad news for homeowners that are holding policies from those companies…
‘My concern is that the insurance companies won’t be able to handle all the claims and file for bankruptcy and that’s that. It’s scary,’ Los Angeles construction worker Ivan De La Torre, 32, whose uncle and sister both lost their houses in a fire that consumed half of Altadena, a suburb of some 40,000 people north of Los Angeles.
As hundreds of Los Angeles residents return to find homes reduced to ashes due to a devastating wave of wildfires, many are fearful that their insurance policies may not cover the rebuild cost and that future premiums will be astronomical.
Rebuilding costs are going to be insane.
Just think about how much it would cost to rebuild the home that you are living in right now.
If you are a homeowner, could you rebuild your home for what you originally paid for it?
