AIR Estimates California Wildfire Insured Losses Up to $3 Billion

Catastrophe modeling firm AIR Worldwide estimates that California wildfire industry insured losses from the Tubbs, Pocket, Nuns, Atlas, Redwood, and Sulphur fires will be between $2 billion and $3 billion. AIR's loss estimates capture residential, mobile home, commercial, and automobile losses, as well as direct business interruption losses.

Multiple wildfires exacerbated by hot, dry, and windy conditions spread across eight counties of California starting in early October. Twenty-two active wildfires were reported by the California Department of Forestry and Fire Protection on October 12, consuming more than 170,000 acres and destroying more than 3,500 structures. Winds moderated by October 16, which enabled firefighters to make progress toward containing the 15 wildfires still active across California; more than 217,000 acres had burned, and approximately 5,700 structures had been destroyed. As burning continued, the most recent report is that, in total, more than 245,000 acres have burned, and an estimated 8,700 structures have been destroyed. Thousands of acres have burned in Yuba, Sonoma, Napa, Lake, Mendocino, Butte, Nevada, and Solano counties, which were heavily impacted by the fires.

Of the 100,000 people evacuated throughout this event, an estimated 500 remain displaced. A state of emergency was declared on October 9 for the counties of Napa, Sonoma, Yuba, Butte, Lake, Mendocino, Nevada, and Orange, and an emergency proclamation for Solano County was issued on October 10.

Analysis from AIR shows that losses will be dominated by residential losses, with several neighborhoods—most notably, in Sonoma County—experiencing catastrophic loss. These estimates of insured losses are based on the assumption of nearly 100 percent take-up rates. The fact that damage from fire, including wildfire, is included in standard homeowners policies in California informs that assumption. The range in AIR's loss estimates reflects uncertainty in the payment of additional living expenses resulting from mandatory evacuation of the cities' population and loss of some individual structures outside of the most affected neighborhoods, as well as widespread but lower levels of loss due to smoke, loss of electricity, and damage from suppression efforts. Loss estimates were derived utilizing the AIR California wildfire model and are based on exposures as of December 31, 2016.

AIR's modeled insured loss estimates do not include losses to uninsured properties, losses to land, losses to infrastructure, losses to vineyard grapes and vines, and demand surge.