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.

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