Wildfires Ravage California, Insurers Feel the Heat
The devastating wildfires sweeping through Los Angeles have sent shockwaves through the insurance industry, with major players taking a hit on the stock market. Allstate, Chubb, and Travelers were among the biggest losers on Friday, with shares plummeting 6%, 3%, and 3%, respectively.
Exposure to Insured Losses
According to JPMorgan, these three insurers are the most exposed to insured losses in the wildfires, with Chubb potentially facing particularly high exposure due to its focus on high-net-worth clients in the region.
Estimated Losses Skyrocket
The insured losses from this week’s fires are estimated to exceed $20 billion, potentially surpassing the $12.5 billion in insured damages from the 2018 Camp Fire, the costliest blaze in US history. Moody’s Ratings expects losses to run into billions of dollars, given the high values of homes and businesses in the affected areas.
The Palisades Fire: A Devastating Blaze
The Palisades Fire, the largest of the five blazes, has burned over 17,000 acres, destroying more than 1,000 structures. Pacific Palisades, an affluent area with a median home price of over $3 million, has been particularly hard hit.
Insurance Companies Take Action
Insurance companies have asked Southern California Edison to preserve evidence related to the devastating wildfires, according to a company filing to regulators. This move is likely to increase the likelihood of reinsurance attachments being breached, according to JPMorgan.
Reinsurers Feel the Pinch
Certain reinsurers, such as Arch Capital Group and RenaissanceRe Holdings, also saw their shares decline on Friday, by 2% and 1.5%, respectively.
A Growing Concern
As the wildfires continue to spread, the insurance industry is bracing for the worst. With estimated losses mounting and the full extent of the damage still unknown, one thing is clear: the California homeowners’ market is in for a rough ride.
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