Insurers heavily exposed to California’s market endured sharp losses as the devastating Los Angeles wildfires intensified. Allstate shares plunged by 6%, while Chubb and Travelers dropped over 3%, marking them as some of the worst performers in the S&P 500 on Friday. Smaller dips of over 1% were also reported by AIG and Progressive, reflecting the broad impact of the fires on the insurance sector.
According to JPMorgan, Allstate, Chubb, and Travelers are the insurers most at risk from wildfire-related claims, with Chubb facing heightened exposure due to its focus on insuring high-net-worth individuals in affluent regions. Early estimates suggest insured losses from the fires could exceed $20 billion, a staggering figure that dwarfs the $12.5 billion incurred during 2018’s Camp Fire—the costliest wildfire in U.S. history, as noted by Aon. Moody’s Ratings also projects billions of dollars in losses, emphasizing the significant value of properties in areas affected by the fires.
The Palisades Fire, the most destructive of five active blazes, has scorched more than 17,000 acres and obliterated over 1,000 structures. Pacific Palisades, known for its luxury properties with a median home price exceeding $3 million, has been severely impacted, highlighting the economic ramifications for insurers operating in high-value markets.
Reinsurers, including Arch Capital Group and RenaissanceRe Holdings, also reported declines of 2% and 1.5%, respectively. Rising loss estimates increase the likelihood of reinsurance thresholds being breached, potentially deepening the financial strain across the sector, as noted by JPMorgan.
In a related development, Southern California Edison has been asked by insurers to preserve evidence related to the fires, as disclosed in regulatory filings. Such requests hint at the potential for legal battles over liability, a common occurrence in wildfire-related losses where utility companies are often implicated.
As the fires continue to burn and damage assessments evolve, the financial toll on insurers and reinsurers is expected to grow, underscoring the challenges of operating in wildfire-prone regions during an era of increasingly severe climate events.
