The fires in Los Angeles: the numbers that reveal the extent of the damage

JP Morgan doubled his predictions for the losses of the insurance companies’ policyholders to over 20 billion dollars, and Wells Fargo expected similar losses and estimated that the total economic damage may exceed the 60 billion dollar mark – which could make the fires the most expensive disaster in the history of California, certainly for the insurance companies.

In a dramatic and controversial move, California Insurance Commissioner Ricardo Lara invoked emergency powers that froze insurance policy cancellations for a year. Lara also called on the insurance companies to stop canceling policies that were in the process before the fires started. “Right now, my main concern is to ensure that the victims of the fires get the insurance rights they deserve as quickly as possible,” he said.

Israeli companies were also affected

To understand the event, it should be mentioned that over time the state of California became more vulnerable to fires, earthquakes, floods and droughts, which caused many insurance companies to abandon the market. For example, in 2023, the insurance company State Farm announced that it would no longer accept new applications for home insurance in the country due to the risk of disasters.

Israeli insurance companies may also be affected by the fires: for example, the digital insurance companies Lemonid and Hipo, which traded in sharp declines on Friday. Lemonade fell by 6.2% and ended the trading week down 14.9%, and Hippo fell by 6.7% on Friday and in the entire trading week lost 8.9% of its value.

The S&P company published a report that tries to estimate the damage of the fires. Its authors wrote that the “initial estimates indicate that the losses of the insured from the fires may reach approximately 16 billion dollars.” Even worse, the authors of the report warn that “the significant fire losses in the first two weeks of 2025 could quickly exhaust the disaster budgets of the main insurance companies in the US. This early load may lead to pressure on profits later this year.”