The fires that were still burning in and around Los Angeles this week are expected to be the most expensive natural disaster in U.S. history, with early estimates suggesting the damage will hit close to $60 billion, with only about a third of that insured. Accuweather says it’s estimating the long-term economic damage, counting economic activity lost to the fire, could hit $250 billion. It will take months before insurers can tally up the costs—first they have to get and process claims from homeowners whose records may have gone up in flames. Insurers are rolling out AI-assisted processing tools, but it will still take time before the checks come.
Rebuilding won’t be straightforward, either. California is expected to adjust building codes in the wake of the fire, and there will be a shortage of contractors and supplies as homeowners seek to rebuild tens of thousands of homes all at once. That will push prices up, possibly beyond the amount for which homes were insured. And homes nestled in the wooded hills and canyons where the fire has raged strongest—what insurers call the wildland-urban interface—may no longer be insurable at all.
Then there’s the problem of the insurance companies: Even before the blaze, insurers wanted to lay off much of their risk on homeowners, including the rising price of reinsurance, the insurance that insurance companies take out. That didn’t play well in California, and even before the fires began on Jan. 7, State Farm, Farmers and Allstate canceled or refused to renew some homeowner policies, and suspended new coverage.
Morningstar says the insured losses could top $30 billion, making “a negative but manageable impact on insurers.” But the impact on homeowners may not be so manageable, wrote Patrick Douville, Morningstar’s vice president for global insurance and pension rating. “Premiums are likely to increase, and affordability issues will continue,” he wrote, “potentially affecting property values and leaving some homeowners without insurance.”
Still, no one expects any insurers to go broke, as some did after Hurricane Katrina in New Orleans In 2005, or hurricanes Helene and Milton in Florida last year. That’s partly because many homeowners who lost private insurance were covered by California’s FAIR plan, a last-resort carrier backed by the state, which has only around $300 million in reserves and a few billion in reinsurance. Private insurers and homeowners with insurance are likely going to have to pay more to plug that gap.
The most immediate fallout? Facing rising anger from consumers after it cancelled policies for 72,000 homeowners in California last year, State Farm says it will start writing policies in California again, and is canceling plans to run an ad during the Super Bowl on Feb. 9.
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Elon’s World
Did Musk hide his plans to buy Twitter so that he could illegally acquire shares at a low price? That’s what the SEC is alleging in a lawsuit filed this week. The regulator says Musk waited 11 days to file the legal paperwork after he’d amassed enough Twitter stock (5%), which let Musk underpay by at least $150 million. (He spent about $44 billion, alongside some minority investors.) Musk rejected earlier settlement offers, and his lawyer, Alex Spiros, said the SEC’s case was weak because the agency had filed “a single-count ticky-tack complaint.” Donald Trump’s new SEC chief will now have to decide whether to withdraw the complaint or take Musk to court. • SpaceX rockets returning to earth are showering the globe with debris, delaying hundreds of commercial airline flights. With SpaceX expected to launch up to 400 rockets over the next four years, the headaches could get worse. A single SpaceX launch in 2018 closed airspace for three hours, causing 563 flight delays totaling 77 hours, and requiring planes to add 34,000 miles of flight (once around the earth) to avoid the closure, according to a 2019 Congressional report.
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The Usual Suspects
- Dimon is forever: JPMorganChase chief Jamie Dimon says he’s not going anywhere after all. After 18 years as CEO, Dimon was expected to be easing himself out of the top job over the next year or so, but now he’s lost the two people most likely to succeed him. President and COO Daniel Pinto says he’ll retire next year, and Jennifer Piepszak, also tipped as a potential successor, says she’ll take over from Pinto in due course, but has no desire to step into Dimon’s shoes. In its 2024 proxy statement, JPMorgan named Dimon’s potential successors, who also included Marianne Lake, CEO of consumer and community banking, Mary Erdoes, CEO of asset and wealth management, and Troy Rohrbaugh, who leads the commercial and investment bank.
- McFail: McDonald’s says it’s closing three of it’s six CosMc’s restaurants, a kind of ersatz Starbucks that offered more sweet drinks than coffee, with top sellers including Sour Cherry Energy Burst, Churro Cold Brew Frappe and Island Pick Me Up Punch. Golden Arches HQ says the shuttered shops were simply too large, and it plans to open two smaller CosMc’s in Texas this year.
- Big big banks: JPMorganChase, Wells Fargo, Citi, and Goldman Sachs all reported large profits for the year on Wednesday, suggesting they and their customers are excited about the economy under incoming President Donald Trump. JPMorganChase, the largest U.S. bank, had $14 billion in profits in Q4, and almost $59 billion for the full year. Wells Fargo made $5.1 billion in Q4 and $20 billion for the year. Citi’s profit was $2.9 billion for Q4 and $12.7 billion for the full year. Goldman Sachs saw Q4 profits of $4 billion and $14 billion for 2024. The news was not much of a surprise, as bank stocks were up 23.3% for 2024. Still, JPMorganChase chief Jamie Dimon warned that Trump’s spending plans and tax cuts could fuel inflation and raise interest rates.
- Southwest dinged: Chronically delayed flights can get you in trouble. In one of its last moves, Pete Buttigieg’s Transportation Department is suing Southwest Airlines for operating unrealistic flight schedules on two routes: Chicago to Oakland and Baltimore to Cleveland. In one month, the Chicago to Oakland flight was late arriving 19 out of 25 times. The feds are asking for $2.1 million. This month, the DoT also dinged JetBlue for $2 million and Frontier for $650,000 over late flights.
- What will SCOTUS do? Under current law, if TikTok isn’t sold to an American buyer by Sunday, it will have to shut down its platform here. The Chinese company, which is cryptically close to the Communist Party, has gone to the U.S. Supreme Court—with aid from a brief filed by Donald Trump—to argue the ban violates its First Amendment rights. There’s been some talk that Elon Musk might buy TikTok, but the platform’s Chinese parent, ByteDance, scotched that rumor. Meanwhile, TikTok’s HR boss in the U.S. emailed employees that their jobs are safe, whatever happens, and the company is posting videos of TikTokers who support the its argument that it deserves Constitutional protection.
- Oh, Deere! For years, farmers and construction firm owners have been complaining that tractor maker John Deere has rigged its green-and-yellow machines so that they can’t be fixed by farmers. The farmers say the companies have needlessly required all fixes be made by factory-certified technicians, who often charge high prices and can take days or weeks. Deere and other equipment makers oppose so-called right-to-repair laws, saying that letting anyone access the software that controls many modern machines could compromise safety and risk intellectual property theft. Now the FTC has stepped in in its sunset hours, filing a lawsuit against Deere, alongside the attorneys general of farming states Illinois and Minnesota. “Illegal repair restrictions can be devastating for farmers, who rely on affordable and timely repairs to harvest their crops and earn their income,” said FTC chair Lina Khan.
- Meta-downsizing: A week after abandoning fact-checking, DEI initiatives, and a ban on hate speech, Meta chief Mark Zuckerberg has warned employees of a coming 5% personnel chop, laying off poor performers, and making room to “bring new people in” and make sure the company was benefiting from the “strongest talent,” according to a memo viewed by several news organizations.
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The Short Stack
- No game: Venu Sports, the planned sports channel from Disney’s ESPN, Fox Sports and Warner Bros. Discovery, won’t be launching after all, the companies said, amid mounting legal challenges. The deal appeared ready to roll after Disney effectively took over Fubo, which had objected on antitrust grounds, but then EchoStar, which owns satellite provider Dish, wrote to the judge in the Fubo challenge with its own antitrust concerns. That was enough for the Three Sportsketeers to give their deal a red card. In a statement, they blamed “the ever-changing marketplace.”
- Epstein makes bank: They say you can’t take it with you, but the late Jeffrey Epstein, disgraced tax adviser and pimp to the stars, has proved them wrong. After Epstein hanged himself in jail in 2019, his $600 million estate paid out $164 million to women he sexually abused or trafficked, $105 million to settle a tax-break lawsuit with the U.S. Virgin Islands, and various other settlements. Now Epstein’s estate has received a refund of $111.6 million from the IRS. Because the sexual assault claims have all been settled, the $145 million estate will go to his heirs and executors, not his victims.
Trumplandia
- Those pesky tariffs: Amid dire warnings that tariffs are nothing but a sales tax paid by consumers, not exporters, President-elect Donald Trump’s advisers appear to be refining their tariff vision. The new idea is to slowly ramp up tariffs, month by month, which could boost negotiating leverage and avoid a spike in inflation, Fortune reports, citing people familiar with the discussions. Trump could invoke the International Emergency Economic Powers Act and ramp up tariffs 2% to 5% a month. During his campaign, Trump suggested minimum tariffs on all imports of 10% to 20% and tariffs on Chinese-made goods of up to 60%. Since then, industry leaders have been lobbying Trump and his team for exemptions, while Trump has called tariff “the most beautiful word in the dictionary.”
- The Zuck-Up: Meta chief Mark Zuckerberg will be a co-host of one of Donald Trump’s inauguration balls. That comes after Zuckerberg donated $1 million to Trump’s inauguration, then rolled back Facebook’s fact checking, which had greatly diminished the amount of misinformation spread on the platform. Amazon’s Jeff Bezos, Apple’s Tim Cook and, of course, Mar-a-Lago permaguest Elon Musk have been invited to sit on the dais near Trump at his swearing in. TikTok CEO Shou Chew will be there, too, as a guest of Trump.
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
