How Much Have Celebrities Lost in the California Fires? An Insurance Broker to the Stars Estimates (Exclusive)
As the California fires continue to rage, more and more reports of celebrities who have lost their homes are coming in: Billy Crystal, Anna Faris, Tina Knowles. The loss is unfathomable—and costly.
"I’m hearing crazy numbers," David Sterling, CEO of SterlingRisk, an insurance brokerage firm that helps high-net individuals, including celebrities, increase their coverage, tells Parade. "I’m hearing in the hundreds of billions is the potential loss right now." That's an unconfirmed estimate—"literally and figuratively, the smoke has not cleared yet," Sterling stresses. "But no matter how you look at it, this is going to be one of the most costly catastrophes in insurance history."
Breaking the loss down by house, Sterling explains that many of the affected homes cost between $1,000 and $2,000 per square foot to build, and many of them are roughly 10,000-to-20,000 square feet in size. "So that puts the values at 10-to-40 million in some of these homes," he says. "And that’s just the house, that’s not even including the contents."
For large homes like the ones found in the fire-ravaged Pacific Palisades, insured contents typically run at about 25 percent of the home amount, so a $10 million home has an estimated $2.5 million in contents, a $40 million home has an estimated $10 million in contents and so on.
"The things that we see [in celebrity homes] are artwork, jewelry, collections of things like fancy Harley-Davidson motorcycles, cars," Sterling says. "And then there are the things that you can’t replace." Think: Oscars, scripts, iconic photos, costumes. "These things have very little real value but a lot of sentimental value, and so you have to figure out ways to buy the coverage for their collectibles, for their artwork, for their jewelry, and all of those things work into the homeowner’s policy."
One concern in the midst of this tragedy is whether homes in these burning areas of California will be realistically insurable going forward—a problem that's been mounting in the region for years now.
"These wildfires, while horrific and probably the worst we’ve seen, are not a new story," Sterling says. "They've been happening nonstop over the last five or 10 years." As a result, he says, insurance companies have been "rating addresses and neighborhoods with a score of how vulnerable they are to wildfire, and if you have a high wildfire score, you’re going to find it very difficult to find insurance."
As Sterling explains, many homeowners in areas with a high wildfire score (including the areas currently affected) have turned to the California FAIR Plan, a state-mandated program designed to provide basic property insurance coverage for homeowners who can't get it through the standard market (the program now tends to address insurability in areas prone to natural disasters).
The problem with the California FAIR Plan, Sterling says, is that it doesn't pay out a home's replacement cost—it pays out its replacement cost less the depreciation cost. "A 10-or-15-year-old home will have significant depreciation," he says. "So there’s a lot of concern that a number of the victims here are going to be challenged. First they’re suffering the tragedy of losing everything they own, and then the next step will be the business negotiation of what they’re going to get paid from their insurers. It’s clear to me that a significant number of those people affected will have lost more than they’re going to be able to claim."
Overall, Sterling is hopeful that this latest tragedy is "the wakeup call that everyone needs to do what they need to do to manage the environment so that these [wildfires] are less frequent and less severe."
"If that happens, insurance will rush into California like a flood," he says. "Because insurers want to write business; they just don’t want to write business when it’s a sure loser."
