The raging Los Angeles wildfires have destroyed or damaged nearly 12,000 buildings, scorched the area and obliterated businesses and landmarks alike. Major damage, which occurs in less than ten days, can take up to ten years to repair, according to Larry Fink, CEO and chairman of BlackRock (BLK), which manages large assets of natural disaster insurance companies.
“When you have devastated neighborhoods and destroyed infrastructure and destroyed schools and shopping malls, this is not a one-year fix,” Fink said yesterday (Jan. 15) in an interview with CNBC. “This is going to be a five, six, seven, maybe ten year fix.”
With $11.6 billion in assets under management, BlackRock is the world’s largest asset manager and has approximately $700 billion in real estate for insurance companies. During the company’s third-quarter earnings call yesterday, Fink pointed to insurance as “one of our key areas of growth.”
The sheer amount of damage caused by the Los Angeles fires will make homeowners insurance an important topic in the US going forward, Fink said. The devastating event is personal for the BlackRock boss, who is a native of Los Angeles.
Hiking the Santa Monica Mountains, where the ongoing wildfires broke out, “was one of my joys growing up, looking for snakes and reptiles as a kid, going through the chaparral,” he said, recalling living in Los Angeles at the time of the meeting. the great Bel Air Fire of 1961. “We’ve always had fires in Los Angeles, but we’ve never seen destruction like this.”
What do the LA 2025 fires mean for homeowners insurance?
The ongoing wildfires have killed at least 25 people and brought unprecedented economic damage. Losses in the insurance industry could rise up to $40 billion, according to analysts at Keefe Bruyette & Woods, while Wells Fargo and Goldman Sachs estimate $30 billion in costs to insurers. These numbers surpass the $12.5 million in losses from the 2018 Camp Fire in California—the largest insured wildfire loss to date.
The large number of damaged homes—many of them in affluent neighborhoods like Pacific Palisades or Altadena, which Zillow estimates have home values of $3.5 million and $1.2 million, respectively—will highlight the role of homeowners insurance. across America, according to Fink.
In recent years and months, many insurance companies have withdrawn coverage in California’s fire-prone areas. Los Angeles County, for example, reportedly saw 531,000 homeowner policies canceled between 2020 and 2022. The backlash has forced many California residents to turn to the California FAIR program, the state’s last-resort insurance program. Total exposure to the FAIR program as of September was $448 billion—a 61 percent increase year-over-year and a 123 percent jump compared to 2020.
Besides creating a redefinition of event risk across the US, the effects of the Los Angeles fires mean that homeowner’s insurance will be an important topic for governments going forward, Fink told CNBC. “This will be one of the biggest problems we will have to deal with in the next four years.”
