New estimates put the insured property losses from the wildfires that destroyed Maui, Hawaii at more than $3 billion.
Experts are now warning that the disaster will drive up homeowner’s premiums around the world as more states fall victim to extreme weather events.
This week, thousands of homes were destroyed in the inferno that tore apart the resort town of Lahaina, Maui. The death toll in the blaze currently stands at 106, with more than 1,000 residents still missing.
Prior to the fire, relatively few natural disasters had occurred in Hawaii, which meant homeowners enjoyed the lowest homeowners insurance rates. Consumer Services Company Data The bank rate shows that the average homeowner pays just $382 per year in Aloha State.
But that could soon change, experts have warned, after disaster modeling firm Karen Clark and Company (KCC) estimated losses at $3.2 billion.
Where houses once stood, there are now ashes and ashes. Thousands of people have lost their homes and hundreds are missing 48 hours after the fires
A man walks through the smoldering ruins of Lahaina on Wednesday
An aerial view of Lahaina after wildfires scorched the town on the Hawaiian island of Maui, August 10, 2023. Disaster modeling firm Karen Clark and Company (KCC) estimated that insured property losses s amounted to $3.2 billion.
KCC analyzed satellite and aerial imagery and found more than 2,200 structures were within the perimeter of the Lahaina Fire. An additional 3,000 structures were affected by smoke or side effects.
The company wrote in its report, “In Hawaii, the dry season is getting hotter and drier due to climate change, making the state more vulnerable to bushfires and wildfires.”
It raised fears the disaster could deepen the insurance crisis in the United States, which has already seen premiums plummet and companies refuse to cover homes in states most at risk from extreme weather.
Meyer Shields, an analyst at Keefe, Bruyette & Woods, told the investment site barrons“Companies that take out this insurance can overwhelmingly absorb this loss and carry on.
“They will, I’m sure, raise the rates afterwards, because over the next few years we will be dealing with a very fresh memory of this loss, which unfortunately, like so many other losses, is rather unexpected. “
He added: “This will reinforce the already existing momentum of higher owner rates, as the potential losses that companies will anticipate in, say, 2024-2025 will now be higher.”
The U.S. insurance market was already in a vulnerable state as companies tried to cope with an increase in extreme weather events brought on by climate change.
This has prompted insurers to increasingly deny coverage to homeowners in the highest-risk states like California and Florida.
In June, the largest US property insurer, State Farm, announced that it would almost entirely stop issuing new policies in California due to the Golden State wildfires.
Meanwhile, dozens of insurers also announced plans to drop Florida due to its growing vulnerability to extreme weather.
The search for wreckage in Maui on Thursday revealed a wasteland of burned homes and shattered communities as firefighters battled the stubborn blaze, making it the deadliest in the United States.
And rising payments have forced companies to raise the cost of premiums. The average cost of homeowners insurance in the United States has soared to $1,700 a year – according to Barron’s – up about 10% from a year ago.
William Blair analyst Adam Klauber predicted the Hawaii fires were likely to see insurers increasingly pull out of specific areas.
“We will continue to see more geo-restrictions and non-renewals,” he told Barron’s.
Klauber added that consumers may be forced to turn to less regulated and more expensive providers for coverage.
Government regulation and intervention in insurance markets vary from state to state.
Historically, Hawaii has had a strong private insurance market that has not required aggressive intervention.
The biggest disaster to hit the state was Hurricane Iniki in 1992. Subsequently, the legislature established a fund to provide hurricane insurance for homeowners.
However, the fund was terminated in 2002 after the private market rebound.
