The Costs of the Los Angeles Fires

ImageA devastating tollMore of the Los Angeles area is ablaze on Thursday, after a new wildfire in the Hollywood Hills broke out as firefighters sought to contain others, including the 17,200-acre Palisades fire.Critical fire conditions are expected to continue for at least another day.The blazes are already the most destructive in Los Angeles history.

At least five people have died, and predictions of the economic devastation — in terms of damages to homes and landmarks, the film and TV industry and more — are steadily climbing into the scores of billions.And the California insurance market, already battered by a string of climate catastrophes, is taking another pounding.The latest on damage estimates: AccuWeather estimated on Wednesday that the economic costs would reach up to $57 billion.

That’s more than triple the forecaster’s assessment of the wildfires in Hawaii in 2023 ($14 billion to $16 billion), but less than the 2020 West Coast wildfires ($130 billion to $150 billion.)The California fires have burned more than 27,000 acres, including parts of the upscale Pacific Palisades area, where the median house value is about $2 million.Shares in Edison International, the parent company of the power utility that serves the Los Angeles area, tumbled 10 percent on Wednesday.

While the causes of the fires are unclear, investors appear worried about potential legal liabilities that cost other utilities billions in settlements tied to other wildfires.California’s insurance market faces an existential test.The state had already been working to stop insurers from fleeing, given that fires in 2017 and 2018 wiped out a quarter-century of their profits.

The most recent blazes may hasten that exodus, which could drive up already elevated rates.More than 100,000 Californians lost coverage from 2019 to 2024, with State Farm — one of the state’s biggest insurers — dropping 70 percent of its customers in and around the Santa Monica Mountains last summer.We are...