As Hawaii deals with the aftermath of devastating wildfires that have claimed more than 100 lives and up to 2,200 buildings, the economic fallout is just beginning to take root.

The Biden Administration announced aid this week that could provide $700 per household to those critically impacted by the wildfires in Maui. However, that may fall short as the insurance losses for property damage could top $3.2 billion, the largest ever for the state.

Massive Property Loss, Especially For Homeowners

Insured losses from Maui's wildfires, or the amount that could be paid out to property owners, could top $3.2 billion, according to an estimate from modeling firm Karen Clark & Company. That would be Hawaii's biggest disaster-related insurance payout on record, ahead of roughly $3 billion in damages from Hurricane Iniki, which hit the island chain in 1992.

The cost to rebuild damaged areas was pegged at roughly $5.5 billion by the Maui Emergency Management Agency (MEMA) and Pacific Disaster Center on August 11. They also revealed that about 86% of the impact was seen in areas classified for residential use.

This is especially important as property values in Hawaii are some of the highest in the nation, with the average home in the state worth more than $836,000, according to Zillow, while the median-priced home sold for $709,000 in June. The median home price for the island of Maui was about $1 million last month.

Predatory Developers May Sense An Opportunity

However, in the short-term, Maui residents whose lives have been upended by the fire may face another tough situation—offers to buy their land from predatory property developers.

Hawaii Governor Josh Green issued a statement Tuesday urging Maui residents who are looking to sell their property to exercise caution, saying predatory buyers including developers could scoop up real estate at below-market prices in the aftermath of the fires, further pricing locals out of the market.

"We are disheartened to hear that survivors of this catastrophe are being approached by unscrupulous persons whose only goal is to prey upon them," said Esther Brown, Complaints and Enforcement Officer for Hawaii's Regulated Industries Complaints Office.

Long-Term Insurance Implications?

Insurance companies make money by charging premiums on the policies they write, and could lose money if they need to pay out more claims than projected—a situation that has happened recently in high-risk states like California and Florida.

Insurers like State Farm and Allstate (ALL) have pulled out of states like California that are at high risk of natural disasters, as the cost of insuring homeowners from property damage far exceeded the premiums collected.

Hawaii is vulnerable to wildfires and earthquakes, and insurance companies could consider withdrawing coverage from the state if losses mount in the future. There is no intent to do so at the moment, however. While it did not respond to questions about the future of its operations in the state, Allstate said in an emailed statement that it "has been helping customers in Maui recover from the recent wildfires and rebuild their lives," but that it is "too soon to know the total number of claims we expect to receive."

State Farm and Progressive (PGR) did not respond to requests for comments.

Tourism Revenue Lost Could Add To Financial Stress

Recent wildfires have also devastated the island's economy, which earns roughly 80% of its revenues from tourism, according to the Maui Economic Development Board.

Visitor arrivals to Maui Island had steadily risen leading up to the fires' outbreak. They totaled 1.485 million in the first half of 2023, which was up from 1.4 million during the first half of last year. However, tourism has ground to a halt in recent weeks.

The Hawaii Tourism Authority has urged tourists to leave the island and has strongly discouraged travel to the island's western half, the epicenter of the wildfires.