Hawaii’s economy has suffered between $4 bn and $6 bn in losses after deadly wildfires ripped through several regions of Maui in August.
The Lahaina conflagration and Kula wildfires in early August burned between $2.5 bn and $4 bn worth of insured properties in the state, an estimate from risk-modeling company Moody’s RMS shows.
Rebuilding on Maui following the devastating wildfires could cost more than $5.5 billion. Insurance is expected to cover at least 75% of the economic damage, according to Moody’s, because the state has high insurance penetration rates and policies typically cover wildfire damages.
However, “extenuating factors” such as potential supply-chain issues and the impact of inflation on construction prices can drive up the cost of losses even higher than insured-value estimates, the ratings company noted.
- The catastrophic wildfires on Maui caused between $4 billion and $6 billion in economic losses, according to estimates from Moody’s RMS.
- The billions of dollars in estimated losses do not take into account the wildfire’s broader effect on Hawaii’s gross domestic product, government payments or the social cost of the blazes.
- The wildfires are the worst disaster in Hawaii state history.
The assessment reflects direct and indirect losses from physical damage caused by the fires which burned through approximately 2,170 acres, or 3.4 miles. More than 100 people have been confirmed dead as a result of the catastrophe, while more than 1,000 remain unaccounted for.
This event follows an unprecedented wildfire season in 2019 in Maui, when over 20,000 acres burned and attention on the islands to wildfire risk has never been higher.
The estimate includes property damage, contents, and business interruption, across residential, commercial, industrial, automobile, and infrastructure assets.
Moody’s calculated the state’s economic losses using building-level damage assessments from multiple sources, in addition to damage maps from the Maui Emergency Management Agency.
The estimate of Hawaii’s economic losses does not factor in the blaze’s effect on the state’s gross domestic product; government spending on the response to the catastrophe or the social cost of the fires, as the daily lives of families and communities are forever changed.
Post-event loss amplification is expected to be high in this event due to the island effect on supply chains, high construction labour costs in general, inflationary impacts during the expected long recovery time, and potential ordinance and law requirements.Rajkiran Vojjala, Vice President Modeling, Moody’s RMS
Business interruptions are another notable source of economic losses from the fires reflected in Moody’s estimates. In addition to businesses directly impacted by the fires, the are also those indirectly impacted.
Small businesses located on safe parts of Maui remain open but are suffering from a loss of tourist dollars as airlines and government officials warn travelers to cancel their trips to Hawaii’s second largest island.
The majority of the economic damage is expected to be covered by insurance. Given the fact that 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.
This dictates an insured loss range from Moody’s RMS of $3-$4.5 billion, as compared to the loss estimate from analysts at Bloomberg who estimated an insured loss between $2.5-$4.5 billion.
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 SafetyMichael Young, Vice President, Product Management, Moody’s RMS
KCC estimated this fire to have been the second largest insured loss event to ever take place in Hawaii, with $5.52 billion worth of exposed structures.
Roughly 70% of every dollar in Maui is generated directly or indirectly through the “economic engine” of tourism, according to the Maui Economic Development Board’s website.
by Yana Keller