Estimates range as high as $16 billion, but some insurance experts say it's too early to hazard a guess

Ten days after the most destructive wildfire in Hawaii’s history ripped through the historic town of Lahaina, nobody can agree on how much the aftermath will cost insurers.

Catastrophe risk modeler Karen Clark & Co. estimated $3.2 billion in insured property losses from the inferno. The Boston-based firm's appraisal focused on more than 2,200 damaged or destroyed structures and 2,170 incinerated acres in the town of roughly 12,700 residents. In its calculation, KCC cited data from the Pacific Disaster Center and the Federal Emergency Management Agency, or FEMA.

Bloomberg Intelligence polled analysts who believe the insured losses could reach as high as $4.5 billion, with a median estimate of $3.5 billion. Royal Bank of Canada projects the total could range from $2 billion to $3 billion, assuming a $1 million loss per home.

Meanwhile, Moody’s analysts projected Monday that total costs will be anywhere between $3.5 billion and $7 billion. The most dire prediction is from Accuweather, which puts the total damage and economic toll at $14 to $16 billion, up from its earlier projections of $8 billion to $10 billion.

Whatever the final number, it's likely to be higher than not, given Lahaina's average single-family home value of $1.5 million.

Mark Friedlander, the director of corporate communications at the Insurance Information Institute, a trade group and lobby, said Friday that it’s common to see several different insured loss estimates after a tragedy of such magnitude.

“Every organization has its own methodology on determining property loss,” Friedlander told The Messenger in an email. “Sometimes, organizations issue an estimate before all facts are known. Also, some organizations only focus on residential property, not all levels of loss, including commercial structures and vehicles (which will probably number in the several thousands from the Maui fires).”

Friedlander said that KCC was the most accurate of all catastrophe modelers due to its all-inclusive data. But property claims experts at New York-based Marsh, the global brokerage and risk advisory business of Marsh McLennan, told The Messenger that "it’s just too early to put any clear number on insured damages."

At least 111 people have been confirmed dead from the blazes as of Friday, but the toll is likely to rise, given the widespread damage and destruction.

Robert Anderson, a California-based chartered property and casualty underwriter, said it's difficult to project the real level of insured losses because people often underestimate the costs of rebuilding their homes.

“The replacement costs of the dwellings are going to be substantially different than what most people probably insured their houses for,” Anderson said. “And what we’ve found is that a significant number of people, maybe 50% or more, whose houses are destroyed, are way low on the amount that it’s really going to cost in replacement to rebuild.”

One factor driving the underinsurance of buildings is the rising costs of home improvements and tighter building standards, which are often not reflected in people’s insurance policies, Anderson said.

Between January 2020 and December 2022, prices of U.S. home construction materials rose 33% percent and labor increased 27%, according to the American Property Casualty Insurance Association. As a result, the trade group and lobby is urging policyholders to update their documents to reflect higher rebuilding costs ahead of time.

Reconstruction costs will also be higher because because most building materials need to be brought to the island, Moody's said in its Aug. 14 report.

Some 86% of the buildings exposed to the blaze were classified as residential, according to the Pacific Disaster Center.

Moody's downgraded on Friday the credit rating of Hawaiian Electric Company Inc., citing "heightened uncertainty facing the company in the wake of catastrophic wildfires" that could result in substantial financial liabilities if the company is determined to be at fault for the blazes. Lawsuits against the utility company have been piling up as it faces intensifying scrutiny over the conflagration.

The costliest natural catastrophe to ever hit Hawaii was Hurricane Iniki in 1992. It resulted in insured damages of $1.6 billion, equivalent to $3.5 billion in 2023 dollars, according to the Insurance Information Institute.

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Cost of Devastating Maui Wildfires Is Anybody’s Guess