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The deadly wildfires that devastated the Greater Los Angeles area in Southern California last week are estimated to be the costliest in the state's history, and insurance companies operating in the state face significant losses. Become.
The wildfire, sparked by strong Santa Ana winds in the arid region of the Los Angeles metropolitan area, burned about 40,000 acres and killed at least 24 people. Areas such as the Pacific Palisades, Malibu, and Altadena were particularly hard hit, with more than 12,000 structures destroyed or damaged.
Preliminary estimates indicate that insured losses from wildfires are the highest in California history. A JPMorgan analysis last week estimated that insured losses could exceed $20 billion, while a weekend estimate from Wells Fargo suggested that insured losses could be in the range of $20 billion to $40 billion. billion dollars. Both estimates would exceed the $10 billion in insured losses caused by the 2018 Camp Fire, which affected the Northern California town of Paradise and nearby communities.
Moody's Ratings last week produced an analysis of California's largest insurers using S&P Global Market Intelligence data based on full-year 2023 data, as full-year data for 2024 is not yet available. .
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The Palisades Fire devastated the Pacific Palisades community in Los Angeles. (Axel/Bauer Griffin/GC Images/Getty Images)
It found that California's insurance company with the most direct homeowners insurance premiums in 2023 was State Farm, which accounted for more than $2.7 billion in written premiums for homes in the Golden State.
Farmers Insurance ranked No. 2 in California with more than $2 billion in written premiums for homeowners. Liberty Mutual followed with $908 million, CSAA Insurance Exchange with $895 million and Mercury Insurance with $839 million. Other insurers with California homeowners insurance premiums exceeding $700 million in 2023 were Allstate ($792 million), USAA ($742 million), and Auto Club ($720 million). Ta.
According to Moody's Ratings research, the insurers whose California homeowners business accounts for the largest share of total U.S. homeowners insurance policies are Mercury (19%), CSAA (15%), and Auto Club. (12%).
California wildfires: Insurance losses could exceed $30 billion, Wells Fargo analysis finds
Aerial view of homes destroyed by the Palisades Fire on January 9, 2025. (Tama Mario/Getty Images/Getty Images)
JPMorgan's analysis also includes 2023 homeowners insurance data for California, based on regulatory filings and data from S&P Financial. It included similar numbers for written premiums, with slight variations, and an estimate of the insurer's market share in the California homeowners insurance market from 2023 onwards.
State Farm had the largest market share in California in 2023 at 19.9%, followed by Farmers Insurance with 14.9%, followed by CSAA Insurance Exchange and Liberty Mutual with 6.5% each. Other insurance companies with 5% or more market share in California in 2023 include Mercury Insurance (6.1%), Allstate (5.8%), Auto Club Insurance (5.8%), and USAA (5.4%).
California wildfires could cost insurance companies $20 billion, the highest in state history
A chimney stands amidst rubble after the Palisades Fire passes through on January 8, 2025 in Pacific Palisades, California. (Agustin Pourier/AFP via Getty Images/Getty Images)
Despite historically high estimates of insured losses from the Southern California wildfires, Wells Fargo noted in its analysis that “regardless of the outcome, this is a manageable event for insurers.'' He added that $40 billion in insured losses “would represent a major event.” The hit rate on equity is 2.0%. ”
Several major insurance companies have stopped offering new homeowners and commercial insurance policies in fire-prone areas in recent years, and some insurers are canceling policies or refusing to renew them due to excessive risk. There is also.
California insurance crisis: List of insurance companies that have withdrawn or reduced coverage in the state
On January 8, 2025, an apartment building caught fire during the Eaton Fire in Altadena. (John Putman/Anadolu via Getty Images/Getty Images)
Insurers also raise premiums to account for the risk of wildfires and other disasters, but state law limits those increases and limits hikes in premiums of more than 7% and spread increases over three years. Special approval required.
Homeowners who lose coverage, cannot afford higher premiums, and are unable to find a private insurance policy are the last insurers in California, which tends to charge even higher premiums. FAIR plans are available.
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According to Moody's Ratings research, as of September 2024, Los Angeles County's exposure under the FAIR plan was approximately $112 billion, representing approximately 23.1% of the total FAIR portfolio, representing approximately 53% year-over-year growth. Ta.
