Dear Investors
Since January 7th of this year, several large forest fires have been burning in the Los Angeles area, which expanded very quickly. The fires have already reached Los Angeles’ suburbs. Hundreds of thousands of people are currently being evacuated. The two largest fires, the Palisades Fire and the Eaton Fire, are currently not under control and are threatening the region. Current information from the LA Times speaks of over 2,000 buildings destroyed and several deaths. High wind speeds of up to 100 miles per hour and lush vegetation have increased the spread of the fires and are making it difficult to fight.
As the fires continue to spread uncontrollably, there is currently no clarity about the extent of the damage. However, there is a high potential for damage to the insurance industry. The Palisades Fire in particular is raging in the Santa Monica and Malibu area, with some of the most expensive real estate in California and a median building value of over $2 million. The loss potential for the fires is estimated by some analysts to be between $6 and $13 billion, with overall economic loss potentially reaching $50 billion or more.
However, even though some CAT bonds, which cover multiple perils across the USA, do include wildfire, it is unlikely that the current Los Angeles wildfires will have a meaningful impact on those bonds, since wildfire contributes only marginally to the risk of those bonds. To assess the risk of these bonds being triggered, we can look back to the 2018 Woolsey wildfire, which burned 97,000 acres (392 km2) in the Malibu area, an area about five times larger than the current.” Palisades Fire». This event would not have resulted in a default of these CAT Bonds.
We will inform you immediately should our assessment change.
Kind regards
Your Plenum-Team
Der Beitrag NewsFlash: Wildfires Los Angeles erschien zuerst auf Plenum Investments.