By Manya Saini
(Reuters) – U.S. insurance stocks slid on Friday as analysts estimated that insured losses from the wildfires threatening Los Angeles could reach as high as $20 billion, making it potentially the costliest disaster in California history .
A lull in the fierce winds that fueled the cycle of wildfires that ravaged Los Angeles this week helped crews make progress in bringing the infernos under control, but forecasters said strong gusts could return over the weekend.
Analysts are evaluating the financial impact of the disaster, with JPMorgan doubling its forecast of insured losses to over $20 billion. Wells Fargo also expects similar insured losses and said the total economic hit from the disaster could be well above $60 billion.
To help provide critical stability amid the devastation caused by the fires, California Insurance Commissioner Ricardo Lara invoked moratorium powers to halt all policy non-renewals and cancellations by insurance companies for one year.
Lara also urged insurance companies to stop any non-renewals and cancellations given to homeowners before the fires start.
“My main concern right now is to ensure that wildfire survivors receive the insurance benefits they are entitled to as quickly as possible,” Lara said at a press briefing.
The Pacific Palisades area is one of the most expensive neighborhoods in the United States, home to Hollywood A-Listers and multi-million dollar mansions. Before this week's disaster, its insurance costs were among the most affordable in the country, according to a Reuters analysis.
But that is likely to change after the scale of losses predicted in the wildfires now raging in Los Angeles, as well as regulatory changes enacted late last year.
“Although leading US property insurers are in good financial shape, the California property insurance market has been challenging…leading many insurers to rethink their product offering, including exiting the market entirely, ” wrote Morningstar DBRS in a client note.
The S&P Insurance Select Industry index was last down 3.2% on Friday.
ENTRY LOSSES
The fires, engulfing iconic Los Angeles neighborhoods and tearing through the Hollywood Hills, have so far killed 10 people and destroyed nearly 10,000 structures.
Private forecaster AccuWeather estimated the damage and economic loss at between $135 billion and $150 billion, suggesting a laborious recovery and a surge in homeowners insurance costs.
“It will take weeks or months to determine the amount of insured damages, but the Los Angeles wildfires are likely to be among the costliest wildfires in the state's history,” Moody's Ratings said in a note.