Los Angeles fires: $40 billion disaster hits California hard
Analysts at Goldman Sachs warn that the recent fires in Los Angeles County could become the most costly in California's history. Losses might reach up to $40 billion, placing these fires among the 20 most expensive natural disasters in the U.S. 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 to $30 billion. Total losses might amount to around $40 billion, making these fires one of the most costly natural disasters in U.S. history.
Impact of fires on the economy
The fires have significantly impacted the region's economy. Employment in the Los Angeles Metropolitan Statistical Area dropped after the fires erupted on January 7. The growth of GDP in the U.S. in the first quarter of this year could be 0.2 percentage points lower, excluding 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 California. The home insurance index in the PCE inflation index stands at 0.1 percent.
The fires have scorched 38,600 acres, 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 U.S. history, with losses estimated in the billions. These events underscore the increasing frequency and intensity of climate change, 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 emphasizes that in Europe, climate changes have cost nearly 400 billion euros (412 billion dollars). 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.
