California Insured Fire Losses Could Reach $800 Million

As the fires continue to burn in parts of southern California, industry analysts are predicting insured losses from the Freeway Complex, Sayre and Tea Fires will range from $600 million to $800 million.

Catastrophe risk modeling firm AIR Worldwide estimates that total insured losses will likely be in that range. These estimates include damage to or destruction of primary structures, their contents, and estimated additional living expenses for residential policies or business interruption for commercial properties.

Meanwhile, First American used its database of property information coupled with the nation’s largest parcel database to estimate that residential property loss will likely reach more than $787 million. This number could exceed $1 billion when contents and additional living expenses are added to the losses, the company said.

According to the California Department of Forestry and Fire Protection (CAL Fire), more than 43,000 acres have burned and close to 1,000 properties have been destroyed. Given the large geographic exposure, heavily populated areas, and extent of the fires, First American found the damage could have been much worse because approximately 10,431 commercial, public and residential properties were located within the combined perimeter of the three wildfires. While all types of properties were in the path of the fires, First American estimated the full exposure of the residential properties is valued at more than $5.8 billion with the average residence valued at $729,000 and a median value of $631,000.

The actual fire perimeters continue to be refined as more information comes in,” said Dr. Tomas Girnius, senior research scientist at AIR Worldwide. “Similarly, there is some uncertainty with respect to the extent to which fire suppression activities have been fully effective within all three perimeters. While many homes and businesses will have survived, the number of claims is likely to be significantly larger than the number of destroyed structures — although the size of each claim for a slightly damaged home is expected to be small.”

Dying winds and mild temperatures helped firefighters control the wildfires that began raging across southern California Nov. 13-16, 2008. By November 20, two of the three fires were fully contained and the third, already reduced to a slow-moving, smoldering ground fire, was 95 percent contained.

With only 695 properties exposed, the Tea Fire in the Montecito and Santa Barbara areas was actually the smallest fire but posed the highest level of risk with estimates of exposure reaching $632 million for residential properties. First American estimated the total residential loss in this area will reach approximately $280 million or more with 200 homes impacted. In this area, the average price per house is $1.4 million with the median estimated at $1.3 million. This fire is now 100 percent contained.

The Freeway Complex Fire, the largest wildfire in terms of area, targeted an estimated 8,430 properties with residential properties valued at $4.7 billion exposed the fires. In this area, the average price per house is estimated at $710,000 with the median estimated at $634,000. This fire is now 100 percent contained. The actual residential loss for this area is estimated by First American to be approximately $224 million with 314 homes impacted.

The Sayre Fire has an estimated residential loss of more than $283 million with approximately 500 homes, mostly mobile homes, impacted. First American estimated 1,303 residential properties valued at $452 million were exposed to the fire. In this area, the average price per house is estimated at $566,000 with the median estimated at $537,000. This fire is now 95 percent contained.

California Governor Arnold Schwarzenegger declared a state of emergency in the four counties affected by the fires and President Bush authorized emergency federal aid for the state. The Santa Barbara County Sheriff said the Tea Fire had been accidentally caused by a bonfire built by a group of college students.

“The Southern California Santa Ana winds uncharacteristically blew only intermittently and without much strength in September and October — but beginning last Thursday they arrived with near hurricane-force gusts of 70 mph,” said Dr. Girnius. “Conditions in the Los Angeles region were dry and temperatures were high, contributing to the ferocity of the fires.” Fed by the winds, the Sayre Fire, which began Friday, and the Freeway Complex Fire, which began Saturday, together burned through nearly 42,000 acres of land.

High temperatures in the region are noiw in the upper 60s and 70s, winds are quiet, and humidity has increased. However, even as evacuees have begun to return home — many to pick through the charred remains of their belongings — a Fire Weather Watch has been declared into this morning for the Santa Ynez Mountains above Santa Barbara and along the south coast of Santa Barbara County. A new round of gusty, though less intense, northerly Sundowner Winds — the local name for Santa Ana-type winds — are expected to begin again just when the humidity also is expected to fall to critical levels.

Sources: Air Worldwide, CALFire, First American