The insurance losses from the massive wildfires sweeping through Los Angeles are projected to set a historic record.

According to the Wall Street Journal (WSJ) on the 15th, insurance brokers are continually revising their estimates of total losses faced by insurance companies due to the wildfires. Investment firm Evercore ISI predicts that total losses could reach $25 billion, describing it as potentially "the most expensive wildfire in modern history."

While California has previously experienced wildfires with greater geographic damage, this incident has particularly devastated residential areas, with over 12,000 structures destroyed or damaged—most of them homes. Estimates suggest the number of affected buildings has now exceeded 15,000.

The high value of the homes in the affected areas is a significant factor in the mounting insurance losses.

According to real estate data provider Zillow, the average home price in Pacific Palisades—a coastal affluent neighborhood ravaged by the "Palisades Fire"—is $3.4 million. Known for its panoramic ocean views, the area is home to Hollywood celebrities and wealthy individuals.

Similarly, the "Eaton Fire" in Altadena, an inland area, has impacted homes with an average value of $1.3 million. Altadena's median annual household income is approximately $130,000, well above the median for Los Angeles County ($88,000) and the national average ($80,000). Pacific Palisades boasts an even higher median income of $180,152.

The New York Times (NYT) also highlighted the broader impact of the wildfires in an article titled, "Economic Damage from LA Fires Far Exceeds the Value of Destroyed Homes." The article emphasized that this wildfire, unlike many others, struck densely populated urban areas with above-average income levels.

Experts warn that a surge of wildfire victims entering the rental market could further strain LA's already tight housing supply, driving up rental prices. Meanwhile, rebuilding the affected areas is expected to take considerable time due to labor shortages and skyrocketing construction material costs brought on by the COVID-19 pandemic.

The cost of rebuilding public infrastructure in the fire-damaged areas also poses a significant challenge. Repairing damaged water and sewage systems, power grids, and roads will require substantial public funding, for which resources are not yet secured.

In response, California Governor Gavin Newsom issued an emergency executive order prohibiting exploitative real estate transactions targeting wildfire victims. The order aims to prevent real estate agents from pressuring homeowners in Pacific Palisades and Altadena to sell their fire-damaged properties at prices well below market value. Reports have surfaced of agents approaching affected residents with offers to buy their properties at a steep discount.



<Hwandong Cho>