Insured losses from the wildfires that have destroyed much of the Lahaina community and led to the deaths of at least 96 people in Hawaii’s Maui are expected to top $1 billion, Moody’s has estimated.
“Given the damage assessment and Lahaina's relatively high $1.5 million average single-family home value, we estimate insured losses will be at least $1 billion and primarily affect P&C insurers with significant homeowners and commercial property market share in Lahaina,” Moody’s said in a sector comment shared with Insurance Business.
It is likely to take “weeks or months” to determine the full extent of insured damages, Moody’s said.
The Pacific Disaster Center and FEMA have estimated that 2207 structures were either damaged or destroyed in the Lahaina fire, while 2719 structures were exposed. Karen Clark & Company has estimated that some 3,500 structures within the Lahaina wildfire’s perimeter could have been affected.
Proximate causes of the fires remain unknown, Moody’s said. However, they spread quickly due to dry conditions and heavy winds exacerbated by Hurricane Dora, which passed several hundred miles south of Hawaii.
Several #wildfires are burning across parts of Hawaii this week, fueled in part by strong winds from Hurricane Dora passing to the south. @NOAA's GOESWest was tracking the hotspots and smoke from the fires as they burned across parts of Maui and the Big Island yesterday evening.… pic.twitter.com/WzApS2ddTi
— NOAA Satellites (@NOAASatellites) August 9, 2023
The close proximity of buildings in Lahaina and the combustible materials used in their construction, such as wood, added to the rapid spread of the fire, Moody’s said.
Major carriers, including State Farm, Allstate, and Tokio Marine, have exposure in Hawaii. However, Moody’s anticipated that large carriers would “readily absorb” any losses driven by the Maui wildfires.
“These firms have considerable resources to withstand catastrophe events given their careful monitoring of exposures, geographic diversification, high quality reinsurance protection and strong capital bases,” Moody’s said.
Moody’s predicted further losses across personal watercraft and auto insurance, with some reinsurers potentially set to incur a share of the Hawaii wildfire losses through catastrophe policies and quota share and per risk policies.
An increase in demand for construction labor and materials is likely to add to insured losses, Moody’s said.
High construction inflation could mean some homeowners are underinsured for the cost of a full rebuild, Moody’s said.
The Maui wildfire loss is likely to be the second largest in Hawaii’s history, KCC has predicted. Moody’s also said that the wildfire is likely to be among the “most costly catastrophes in the state’s history”.
The costliest Hawaii natural catastrophe insured loss was driven by 1992’s Hurricane Iniki, which drove insured damages of $1.6 billion, equivalent to $3.5 billion in 2023 dollars, according to Insurance Information Institute figures.
