Los Angeles fires may become California's costliest disaster
Analysts at Goldman Sachs warn that the recent fires in Los Angeles County might become the most costly in California's history. Losses could reach up to $40 billion (£33 billion), making it one of the 20 most expensive natural disasters in the US relative to GDP.
According to Cal Fire, over 12,000 buildings have been destroyed. Goldman Sachs analysts estimate that insurance losses could range from $10 billion to $30 billion (£8 billion to £25 billion). Total losses might amount to around $40 billion (£33 billion), placing these fires among the most costly natural disasters in US history.
Impact of fires on the economy
The fires have affected the region's economy. Employment in the Los Angeles MSA dropped after the fires erupted on 7th January. The growth of GDP in the US in the first quarter of this year could be 0.2 percentage points lower, not including reconstruction costs.
Experts at Goldman Sachs do not anticipate a significant impact of insurance costs on inflation. The fires in Los Angeles County have a limited effect on prices outside of California. The home insurance index in the PCE inflation index is 0.1 percent.
The fires have scorched over 15,600 hectares, and 88,000 people are still under evacuation orders. Another 84,800 people have received threat warnings.
The Los Angeles fires have become one of the most expensive environmental disasters in US history, with losses estimated in the billions. These events underscore the increasing frequency and intensity of climate changes, leading to a crisis in the insurance market. Insurers are increasingly withdrawing from California, forcing residents to seek alternative solutions.
Fires in Canada are also causing losses in the oil sector, and production restrictions have reduced the region's GDP.
Climate changes costly for the economy
Extreme weather events are becoming the new norm, leading to severe economic consequences.
The EEA report emphasises that in Europe, climate changes have cost nearly €400 billion (£338 billion). The intensification of extreme events, such as droughts and storms, generates significant losses, affecting the agricultural and water management sectors. Reconstruction costs are becoming a challenge for state budgets.
