By George Glover

Santa Ana winds could hinder efforts to contain the Los Angeles wildfires, forecasters are warning, driving up the risk of more destruction.

At least 24 people have been reported dead and at least 23 are missing in the Eaton and Palisades area. The fires have torn through more than 14,000 acres of land and burned thousands of homes, buildings and other structures wreaking billions of dollars worth of economic damage.

Investors appeared to be shrugging off that risk early Tuesday. Shares in some of the bigger publicly-listed insurers with exposure to California were either rising or treading water: Allstate rose 0.7% in premarket trading, while Chubb climbed 0.2%. Travelers traded flat. Mercury General -- which is likely more exposed to the fires than any other public property and casualty insurer -- was having a tougher time of it, sliding 2.1%.

The companies will likely have to cover tens of billions of dollars worth of losses even if there isn't another flare-up. Evercore ISI analysts have forecast total losses of between $20 billion and $25 billion of insured losses, while Aon is estimating that the Palisades and Eaton fires alone could account for $22 billion of losses for the industry.

But a big selloff last week, which saw Allstate fall 4% and Mercury crater 20%, still looks like an overreaction. Barron's has argued that severe weather could actually help the insurers, by enabling them to raise premiums, and Jefferies analyst Yaron Kinnar said Monday that most insurers should be able to manage the earnings impact of the fires because they've de-risked from California in recent years.

The California Department of Forestry and Fire Protection said late Monday that the largest Palisades Fire was still only 14% contained, and that the second-largest Eaton Fire was 33% contained. The National Weather Service estimates that winds could top 70 miles an hour on Tuesday, which could accelerate the blazes.

Write to George Glover at george.glover@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 14, 2025 07:29 ET (12:29 GMT)

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