By Katherine Hamilton
Chubb said it will spend about $1.5 billion pretax on Los Angeles wildfire recovery and is reducing its coverage in California because pricing in the state isn't keeping up with rising risk.
Chubb's estimated cost was below its reinsurance deductible despite its outsized share of high net worth customers, which analysts believed could put the company at higher risk as fires raged through affluent neighborhoods in Southern California.
The anticipated loss, which was estimated by adjusters on the ground looking at individual properties, will most likely be recorded in the first quarter, Chief Executive and Chairman Evan Greenberg said during a call with analysts.
As of 2023, about 5% of Chubb's direct written premiums were located in Southern California, according to data from Keefe, Bruyette & Woods. Analysts have estimated the fires will cost the whole insurance industry around $30 billion.
Greenberg said the company has reduced its coverage in Southern California by over 50%, though he didn't give a time frame for that reduction. While the risk of natural disasters is rising, insurers aren't able to elevate prices as much as they need to offset that increase, Greenberg said. California's regulatory market is especially complex for insurers because rate increases must be approved by the state's insurance commissioner.
"We're not going to write insurance where we cannot achieve a reasonable risk-adjusted return for taking the risk," Greenberg said.
Chubb is still assessing the size of losses from natural disasters and whether they will fall on reinsurance balance sheets, he said. For now, there is no change to reinsurance purchasing.
In the fourth quarter, Hurricanes Milton and Helene cost the company $449 million for a total $607 million in pretax catastrophe losses.
Pretax catastrophe losses rose to $2.39 billion in 2024, up from $1.83 billion the previous year.
Write to Katherine Hamilton at katherine.hamilton@wsj.com
(END) Dow Jones Newswires
January 29, 2025 11:26 ET (16:26 GMT)
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