California wildfires to cost insurance industry between $2bn and $3bn: AIR

California wildfires that began earlier this month will cost the insurance industry between $2bn and $3bn, according to modelling company AIR Worldwide.

The fires started at the beginning of October and spread across eight counties of California as a result of hot, dry and windy conditions. AIR said its insured loss estimate includes losses from residential and commercial property, motor losses and direct business interruption.

AIR estimates that more than 245,000 acres of land have been burned and 8,700 buildings destroyed by fire in the counties of Yuba, Sonoma, Napa, Lake, Mendocino, Butte, Nevada and Solano. The wildfires are still being contained and nine were still burning on 25 October. More than 100,000 residents have been evacuated from affected areas.

An autumn heatwave has seen record temperatures in Los Angeles hit 104°F, breaking the last record of 99°F set 108 years ago.

AIR said: “Losses will be dominated by residential losses, with several neighbourhoods – most notably, in Sonoma County – experiencing catastrophic loss. These estimates of insured losses are based on the assumption of nearly 100% take-up rates. The fact that damage from fire, including wildfire, is included in standard homeowners’ policies in California informs that assumption.”