Rising from the Ashes: Assessing the Property Damage Caused by the Maui Fires
Last month, the presence of a strong high-pressure area north of Maui and a hurricane south collided, fueling a firestorm that ripped through the island. The world watched as the fires ravaged the island, killing 97 people, leaving a handful of individuals missing, and decimating people’s homes and businesses. The fires completely burned down the historic community of Lahaina on the west side of Maui. Two thousand one hundred seventy acres of the island were engulfed in flames. To date, the Maui fire is one of the deadliest in the last 100 years in the United States, surpassing California's 2018 Camp Fire and its 85 fatalities. Following the devastation, residents are still grappling with the damage and loss while also trying to determine their path forward in the aftermath of the disaster.
The Cost of Destruction
Immediately after the initial relief and rescue efforts, many different organizations descended upon Maui to assess the damage. Maui County officials, the Pacific Disaster Center (PDC), and the Federal Emergency Management Agency (FEMA) estimated that 2,207 structures were damaged or completely destroyed. The county has estimated that rebuilding from the damages will cost about $5.5 billion.
Moody’s RMS, the leading global catastrophe risk modeling and solutions company, estimated that the fire caused $4 to $6 billion in losses from property damage and business interruption. This estimate includes damage across residential, commercial, industrial, automobile, and infrastructure assets. It is also important to note that Moody’s estimate did not include gross domestic product loss, government payments, and additional social costs, which means that the total costs of destruction are likely to be much higher. The risk modeling company went on to share that only about 75% of damage will be covered by insurance.
AccuWeather, a commercial weather forecasting service, also provided a preliminary estimate that cited the total damage and economic loss of the fires will be between $14-16 billion, which is 15% of the state's GDP. This estimate accounted for tourism which generates 75% of the island’s revenue. Another preliminary estimate claims that there will be $1.3 billion in residential reconstruction value from the Maui fires.
*** Please note that many of these numbers are estimates at the given time and may be subject to change as more damage is assessed. ***
Impact on the Local Economy
The Maui fires have undoubtedly impacted the island's economy. Numerous hotels, restaurants, retailers, and other local businesses have either permanently closed their doors or are in the process of doing so, resulting in significant job losses for the community.
Given Maui's heavy reliance on tourism, there is a looming threat of a substantial decline in the island's revenue over the coming months and potentially years as Maui undertakes the process of rebuilding. This economic setback could give rise to a range of other financial challenges for the island to contend with.
The Road to Rebuilding
According to Moody's report, the reconstruction efforts in Maui will be both expensive and time-consuming, spanning several years. The Maui fires occurred during a time when inflation is driving up labor, materials, and rebuilding costs, which will ultimately impact the island’s endeavors to rebuild itself after the disaster. Many experts are already foreseeing that the road to recovery will be a long, tumultuous journey.
In the meantime, the locals who are impacted by the fire are focusing on what they can control. They are taking proactive steps by contacting their insurers and initiating claims for property damage and losses, hoping to recoup some of their losses and eventually begin the rebuilding process.
Insurance Implications
In addition to its economic repercussions, the island may encounter significant challenges related to insurance coverage, as the wildfire has prompted many insurers to reevaluate the state's risk landscape.
There has been a growing trend in the insurance industry where carriers raise premiums, impose coverage limitations, or even withdraw entirely from regions with elevated risks of weather-related incidents, as seen in California and Florida. Historically, Hawaii has represented a low-risk and profitable market for insurers. However, climatologists have claimed that climate change has caused the state to be drier and more susceptible to wildfires. In the last few decades, the area burned by wildfires has quadrupled in the state of Hawaii.
The devastating Maui fires in August 2023 have driven many insurance providers to urgently reassess whether adjustments, such as raising premiums or limiting coverage, are needed to safeguard against potential losses. When it comes to their evaluation process, insurers typically look at the frequency and severity of the claims.
While many experts do not foresee Hawaii suffering the same fate as Florida and California, they anticipate higher insurance rates due to the increased severity of risks. As they will be hit with higher premiums, many Hawaiian residents are actively seeking ways to mitigate risks and enhance their preparedness for future climate-related disasters so they can better protect themselves.
How to Reduce Devastation from Future Fires
Following the disaster, numerous individuals and experts are exploring strategies to physically safeguard properties and minimize potential damage.
One of these individuals is Roy White, the chief executive of the Insurance Institute for Business and Home Safety (IBHS). Days after the fires, Roy formed a team to analyze how the fires spread and examined the structural integrity of buildings that emerged unscathed. Their objective is to enhance the resilience of future constructions, with the hope that these new buildings will prove capable of withstanding future wildfires and not suffer a similar fate as the area of Lahaina.
In the aftermath of the tragic Maui fires of 2023, the island faces enormous challenges, from the financial burden of rebuilding to the uncertain future of its economy and insurance landscape. Yet, amidst adversity, the resilience of Maui's residents shines through. With proactive efforts and a commitment to learn from this disaster, the island is on a path toward recovery and a more resilient future.
Although it has been a month since the Maui fires and they are longer in the headlines, many residents of the islands are still dealing with the losses and require substantial assistance in their journey to recover and rebuild from this heartbreaking disaster. If you would like and can afford to, we’ve compiled a list of reputable organizations you can donate to in order to assist the locals on their road to recovery: