The wildfires on Maui have been devastating for many people, with lives lost and property destroyed. That said, many of the HNW individuals who own expensive homes there seem to have escaped unscathed. Here’s the word from Moody’s;
Moody’s RMS®, the leading global catastrophe risk modeling and solutions company, estimates USD 4 to 6 billion in economic losses from the recent Lahaina Conflagration and Kula wildfires in Hawaii. The loss estimate reflects property damage, contents, and business interruption, across residential, commercial, industrial, automobile, and infrastructure assets.
The loss estimation process leveraged building-level damage assessments from multiple sources including analysis of satellite and aerial imagery in the worst-affected areas, as well as damage maps from the Maui Emergency Management Agency published on Aug 11, 2023. The estimate also includes various sources of post-event loss amplification (PLA) and potential for coverage expansion noted after major wildfires on the U.S. mainland in recent years.
While the economic loss estimate reflects direct and indirect losses from damage to physical assets, it does not consider macroeconomic factors such as expected reduction in the island’s Gross Domestic Product (GDP), government payments, or additional social costs due to the wildfires.
Most of the event losses are expected to be from the town of Lahaina, which sustained a catastrophic urban conflagration in the span of 12 hours that burned more than 2,100 acres (850 hectares) and destroyed almost 2,200 structures. Moody’s RMS estimates the burn footprints in Lahaina and Kula wildfires include insured property value in the range of USD 2.5 to 4 billion.
Most of the economic damage is expected to be covered by insurance, in the range of approximately 75% or more, because wildfire is a covered peril under typical insurance policies and the island has high insurance penetration rates. Additionally, several extenuating factors can drive losses higher than simple insured value estimates. “Post-event loss amplification is expected to be high in this event due to the island effect on supply chains, high construction labor costs in general, inflationary impacts during the expected long recovery time, and potential ordinance and law requirements,” said Rajkiran Vojjala, Vice President Modeling, Moody’s RMS.
Michael Young, Vice President, Product Management, Moody’s RMS, noted: “When the rare situation of high wind and wildfire ignitions do occur again in the future, we need to be sure all the buildings comply with scientifically proven risk reduction features highlighted in programs such as the Wildfire Prepared Home program from Insurance Institute of Business and Home Safety.”