MW L.A. wildfires to cost insurers more than $20 billion. Three companies are likely to foot most of the bill.

By Claudia Assis

J.P. Morgan doubles previous insurance-loss estimate; Allstate, Chubb and Travelers most affected

Insurance companies are bracing for more than $20 billion in insurance losses from the wildfires raging in the Los Angeles area, analysts at J.P. Morgan said Thursday, doubling their insurance-loss estimates from a day earlier.

The fires, which are still not under control and have killed at least five people, are likely to cost more than $50 billion in overall losses, the analysts said. An earlier estimate from Accuweather pinned the economic losses from the fires at between $52 billion and $57 billion.

Allstate Corp. $(ALL)$, Chubb Ltd. $(CB)$ and Travelers Cos. Inc. $(TRV)$ are likely to be the publicly traded insurance carriers most affected, as they are the most exposed to the California homeowners' market, J.P. Morgan said. Chubb is of particular concern because the company has focused on high-net-worth policies, and the areas affected by the fires are mostly affluent residential neighborhoods.

"This would make this event significantly more severe than the 2018 Butte County Camp fires, the highest insured-loss wildfires in California's history previously," with insured losses of roughly $10 billion, the analysts said.

The Butte Camp fire impacted more than 150,000 acres and over 18,000 buildings. The current Los Angeles fires haven't affected as much acreage or as many structures, but they are concentrated in affluent areas like the Pacific Palisades, where the median home price exceeds $3 million.

Most insured losses would likely to occur in homeowners' insurance and primary insurers are likely to face a greater burden than reinsurers, the analysts said. A "significant" albeit lesser amount would stem from commercial fire insurance and auto insurance, but as the fires continue to spread to more nonresidential areas, those costs could rise.

-Claudia Assis

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January 09, 2025 14:46 ET (19:46 GMT)

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