As wildfires in California continue to ravage hundreds of thousands of acres and threaten residential areas, the US home insurance sector has reported its most significant losses of the century.
According to a report by AM Best, a credit rating agency, the segment suffered a staggering $15.2 billion underwriting loss in 2023, more than double the previous year’s losses. This loss marks the worst this century, surpassing the $14.8 billion in losses recorded in 2011.
The National Oceanic and Atmospheric Administration (NOAA) reported a record 28 weather and climate disasters in 2023, causing total damages of at least $92.9 billion. For comparison, the annual average for such events between 1980 and 2023 was 8.5.
The Claims and Litigation Management (CLM) organization estimated that Hurricane Beryl, the first hurricane of 2024 on the US Gulf Coast, would cost the US insurance industry between $2.5 billion and $4.5 billion. Meanwhile, over 100 wildfires are currently blazing across the United States, with the most significant fires in California.
California fire officials reported that the Park Fire, now the sixth-largest wildfire in the state’s history, has consumed more than 370,000 acres—an area larger than the city of Phoenix—and destroyed 134 structures. Another wildfire, the Borel Fire, obliterated the historic mining community of Havilah, leaving only a few buildings standing. An evacuation order remains in effect for the town, which has a population of 250.
As of Monday, over 726,000 acres have burned in California this year, with 232 structures destroyed, according to the California Department of Forestry and Fire Protection (CalFire).
In Oregon, the 2024 wildfire season has burned 1,142,727 acres so far, with the Durkee Fire, the largest active blaze, consuming nearly 300,000 acres and destroying 23 structures, according to the Oregon Fires and Hotspots Dashboard.
Wildfires are also burning in Utah and Colorado. In Canada, a wildfire in Jasper National Park remains uncontrolled, with an estimated 30 percent of houses and businesses in Jasper, Alberta, destroyed, forcing thousands to evacuate.
The AM Best report attributes the increased losses to population migration into areas more frequently experiencing weather-related events. David Blades, associate director of industry research and analytics at AM Best, noted that the US population grew 7.4 percent between 2010 and 2020, but the South and West saw increases of 10.2 percent and 9.2 percent, respectively. These regions are more prone to hurricanes, severe storms, and wildfires.
According to the US Census, California, Florida, Georgia, North Carolina, Texas, and Washington accounted for 53 percent of US population growth between 2010 and 2020, all of which are susceptible to severe weather-related events.
Christopher Graham, senior industry analyst at AM Best, warned that if a Category 5 hurricane like Hurricane Andrew, which caused $58.6 billion in damages in 1992, occurred today, the damage could double due to population growth. More buildings in flood-prone areas mean less nature to absorb rainfall, leading to increased flooding, Graham explained.
“The same goes for California with the wildfires,” Graham said. “Building in areas more prone to wildfires and human activities exacerbates these catastrophes.”
In the Park Fire incident, Ronnie Stout, 42, has been arrested and accused of starting the blaze by pushing a burning car 60 feet into a gully, according to Butte County District Attorney Mike Ramsey.
Some insurance companies are now withdrawing from areas prone to such disasters. State Farm, the largest homeowners insurance company in the US, announced it will stop covering more than 72,000 homes and apartments in California this summer due to soaring costs, increasing wildfire risks, and outdated regulations, as reported by The Orange County Register.
