The wildfires around Los Angeles have devastated communities and may trigger "much needed reform" in the insurance industry, analysts said, with analysis of the potential losses still being calculated.
Astoundingly, while total economic losses were today estimated to be at well north of $130 billion and potentially over $250 billion, according to AccuWeather, insured losses are just a fraction of that.
Moody’s estimate pencilled in US$8 billion of insured losses, while S&P Global put its insured loss estimate at up to US$16 billion, which would make it the most costly wildfire in history, surpassing 2017's Camp Fire in Northern California that caused a US$10.5 billion insured loss.
Wildfire specialist MGA Kettle provided an insured losses estimate of between US$11 billion and US$17.5 billion, while Leadenhall Capital Partners currently anticipate the industry loss to be "trending towards US$20 billion with future damage being incremental to the industry loss quantum".
Insurance analysts at Citi said they expect the wildfires, from an insurance perspective, "to be mostly a primary event that will trigger much needed reform and catalyze further primary rate increases also supporting reinsurer rate".
Acknowledging that estimating losses is somewhat guesswork, they expect reinsurance losses to "absorb Q1 budgets but no more".
Lloyds of London insurers "will see some impact but this is tough to have line of sight on" and analysts interested to see "how recent strong Excess & Surplus market growth [which insures things standard carriers won't cover] permeates through the industry".
At Deutsche Bank the estimated insured losses were put at $15-20 billion and analysts said: "Our coverage will be affected (across the reinsurers, primary carriers, and Lloyd's names), however, we see this as manageable within full-year nat-cat [natural catastrophe] budgets as long as the fires are contained soon."
The insurance team highlighted that property and construction values are "considerably higher than they were relative to previous significant Californian wildfires, meaning comparable levels of damage would translate to significantly higher insured losses".