The wildfires ravaging Northern California may be the costliest for the insurance industry in more than two decades by the time the blazes are controlled.
“Although it is too early to provide any current loss estimates, the Valley fire could become the largest wildfire loss event in Northern California since the Oakland firestorm in 1991,” Mark Bove, senior research meteorologist at Munich Re, said in an e-mail Wednesday. That firestorm cost more than $2.6 billion in 2014 dollars, according to Property Claim Services data compiled by the Insurance Information Institute.
The Valley fire destroyed almost 600 homes and hundreds of other structures and was only 30 percent contained, according to a state report Wednesday. Dry weather increased the risk in the state and beyond, with more than 46,000 fires this year, spanning 8.8 million acres (3.6 million hectares) across the U.S., more than twice the area as in the same period in 2014, according to the National Interagency Fire Center.
“If these fires continue at this rate, it’s pretty clear that this year could be the worst year on record in terms of acreage burned,” Thomas Jeffery, a CoreLogic senior hazard scientist, said in a phone interview.
California has about 306,000 properties at high or very high risk of wildfire damage, according to a February report from CoreLogic. The state’s most vulnerable structures have a total reconstruction value estimated at more than $105 billion.
The combination of dry conditions and a bark beetle infestation in California have increased the risk, according to Tyler Banks, chief executive officer of Willis Personal Lines Insurance Services.
Insurers including American International Group Inc. offer coverage that provides inspection of homes in risky areas before the fire season starts.
“They’re probably more prepared now than they were in 2007,” Banks said in a phone interview. “I think we’ve got some very high expectations that this will be a much smoother process than in years past.” The Witch fire struck California’s San Diego County in 2007 and cost more than $1.4 billion.
The largest home insurers in the state include State Farm Mutual Automobile Insurance Co., Farmers Insurance Group and Allstate Corp., according to data compiled by A.M. Best Co. For the industry, the wildfires are more manageable than hurricanes like Sandy, which cost more than $19 billion in 2012, or Katrina, with about $48 billion in 2005 losses, according to inflation-adjusted figures.