Forest fires are intensifying problems in the California property insurance market, according to a new comment from Am Best.

These problems include a decline from the important insurer of California in the last year, followed by the forest fires of Los Angeles, which could result in total losses of up to $ 164 billion and insured losses of up to $ 40 billion.

Allstate Corp. On January 5, it became the fourth carrier in informing losses greater than $ 1 billion of fires. The CEO Tom Wilson, in a profit call call, said that the losses before taxes of the forest fires of Los Angeles are approximately $ 1.1 billion of reinsurance.

The best comment of the AM, “California Wildfires: multiple negative credit impacts for insurers”, says that given the greatest losses in the last years of more frequent severe forest fire events that caused several insurers in the state to withdraw from The writing coverage, California owners have had increasingly frequently frequent. He resorted to the fair plan and the market not admitted.

“Although comparatively modest, the percentage of insurance premium AM Best Associate, Am Best, Industry Research and Analysis, declared in the comment. “This activity reflects a substantial amount of premiums that leave the admitted market and the search for coverage in the market not admitted.”

According to the fair plan data for the fiscal years that end on September 30, this dynamic has led to a 276% increase in policies in the plan from 2018 to 2024. The subscription performance of the fair plan and the insurers that the They support it was unfavorable from 2018 to 2021 to 2021, predominantly of forest fires, according to Am Best.

It is likely that losses lead to a more expensive reinsurance for the fair plan, while catastrophe bonds have seen a negative movement of the secondary market price due to exposure to forest fires. Forest fire losses have reduced bond prices by 10% to 20% on average, according to the comment.

Renaissancere said last week that he hopes to incur around $ 750 million in forest fire losses, and anticipates that the impacts on the entire industry should stop the fall in the reinsurance prices of the property catastrophe.

The insured and total losses of the January forest fires continue to increase in the weeks after the fires, which exploded during the night and were fueled by hurricane force winds, filling the area of ​​southern California with smoke and destroying thousands of properties .

Preliminary data show that insurers have paid more than $ 4 billion for the losses of the two largest of the forest fires of the Los Angeles area that swept the region and destroyed tens of thousands of homes earlier this month.

The claims figures of the insurers published by the Department of Insurance of California on January 30 show that 31,210 claims for the home, business, life expenses and other needs related to the disaster have been presented. According to CDI, $ 4.2 billion have been paid in claims.

The Just Plan, the statement of the State of the State, reported that it received more than 3,200 claims from January 28 due to the damage caused by the Pacific Palisades fire and more than 1,200 claims for damages caused by the Eaton fire.

The fires occur after a year in which carriers began to request rates increases, and began to withdraw from the prone state of forest fires. Calfire’s data show that seven of the 10 most destructive forest fires of the state have occurred in the last 10 years.

In response, the California Insurance Commissioner Ricardo Lara introduced his so -called sustainable insurance strategy to increase coverage in the areas of the State that gave him a forest fire of the State. Lara announced in December a catastrophe modeling regulation and manufacture of grades that will allow carriers to use models as a factor to establish and obtain rates.

The changes in the regulations were well received by the insurance industry, but they can do little to immediately calm the impact of the Los Angeles fires, which is expected that property insurance companies will increase rates, reduce the coverage options, or both, in California and in California and in California. Other areas at risk, according to S&P.

Upper photo: 2025 Eaton Fire in Los Angeles. Source: Calfire.

Topics Catastrophe natural disasters California Wildfire Am better property