The ongoing Los Angeles wildfires are expected to cause insured losses surpassing previous wildfire records. However, Fitch Ratings states these losses are unlikely to impact the ratings of property and casualty (P&C) (re)insurers due to strong capital buffers, diversified risk exposure, and the ability to raise premium rates.
Insured losses are estimated between $10 bn and $30 bn, with economic losses projected at $150 bn to $275 bn.
While these losses may not affect capital levels, they are expected to reduce near-term earnings, particularly for companies with significant exposure to claims from homeowners, auto, commercial property, and business interruption lines.
Reinsurers and insurers with losses exceeding earnings and reinsurance limits may face negative rating actions if their capital positions weaken.
The fires could also push reinsurance costs higher and add further pressure to a market already experiencing an insurer retreat due to wildfire risks and pricing concerns.
California Homeowners’ Insurance Market Share
The top 10 insurers have 78% market share of direct written premium
Rank | Insurer | DPW ($ mn) | Market Share (%) |
---|---|---|---|
1 | State Farm | 2,734 | 19.9% |
2 | Farmers | 2,050 | 14.9% |
3 | CSAA | 895 | 6.5% |
4 | Liberty Mutual | 892 | 6.5% |
5 | Mercury General | 839 | 6.1% |
6 | Allstate | 792 | 5.8% |
7 | Auto Club Exchange | 767 | 5.6% |
8 | USAA | 742 | 5.4% |
9 | Travelers | 554 | 4.0% |
10 | American Family | 416 | 3.0% |
Other Insurers | 3,047 | 22.2% | |
Total | 13,729 | 100.0% |
Wildfire losses in California have historically been viewed as secondary risks compared to hurricanes and earthquakes. The 2017 Tubbs Fire and 2018 Camp Fire resulted in insured losses of $11.1 bn and $12.5 bn, respectively, according to Aon.