18 October 2017Insurance

California wildfire to cost re/insurers more than $4.6bn: Moody’s

Insured losses from the Californian wildfires will be close to $4.6 billion and growing as the fires continue, Moody’s said in an Oct. 16 sector comment.

The 15 large wildfires active across California have so far resulted in a death toll of more than 40 while burning more than 217,000 acres and destroying an estimated 5,700 structures, catastrophe modelling firm AIR Worldwide said on the same day.

Moody’s noted that most of the damage will fall to homeowners and commercial property coverages, although there could be limited effect on other lines of business such as auto physical damage and inland marine.

The wildfires in Northern California will be among the costliest wildfires on record for US property/casualty (P&C) insurers, which were already hit by high third-quarter catastrophe losses from Hurricanes Harvey, Irma and Maria and the Mexico earthquakes, according to the ratings agency.

Among homeowners’ insurers most exposed are State Farm with California homeowners’ premiums of $1.52 billion in 2016, followed by Farmers with $1.25 billion and CSAA with $514 million. Allstate, Auto Club and Liberty Mutual are also high on the list published by Moody’s.

Farmers tops the list of fire insurers most exposed with California commercial fire premiums of $665 million in 2016, followed by Travelers with $362 million and Liberty Mutual with $331 million. Nationwide, Chubb and State Farm also have significant exposure.

Given low insured losses for the California wildfires relative to recent hurricanes, Moody’s expects that few reinsurers will be affected under their per-occurrence catastrophe reinsurance contracts. However, some reinsurers will likely experience losses from quota share, per risk or aggregate cover contracts.

2017 could be a record year for wildfires, with 8.5 million acres burned nationwide through Oct. 6 according to the Insurance Information Institute. Previous records were 2015 when 10.1 million acres burnt and 2006 with 9.9 million acres burnt. Insured wildfire losses are also likely to be among the highest over the last 10 years.

Get the latest re/insurance news sent to your inbox every day -  Sign up to our free email newsletters

Other stories from this morning's newsletter

Reinsurers to keep units in EU/US despite Covered Agreement: AM Best

Insurers not ready for EU Insurance Distribution Directive

Arthur J Gallagher hires mining specialist from JLT Specialty

Starr Companies introduces commercial auto coverages in Canada

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk

More on this story

20 October 2017   The preliminary data on claims from the Californian wildfires reaches $1.05 billion in losses from commercial and residential structures, personal and commercial vehicles, and agricultural equipment, the California Department of Insurance said in an Oct. 19 press release.
27 October 2017   Insured losses from the Tubbs, Pocket, Nuns, Atlas, Redwood, and Sulphur fires in California will be between $2 billion and $3 billion, according to estimates by catastrophe modelling firm AIR Worldwide.
7 December 2017   California wildfires in October 2017 have triggered total insured losses that top $9.4 billion in residential and commercial claims two months after the event, according to the California Department of Insurance.