Early estimates for the bill facing the insurance and reinsurance industry from the devastating California wildfire outbreaks are coming in around a range from $5 billion to $8 billion, according to executives at Aon Benfield.
Speaking during a presentation, Dan Dick, Executive Managing Director at Aon Benfield Analytics, said that early industry loss estimates suggest the insurance and reinsurance industry will face costs in this range.
It’s higher than a recent early estimate from rating agency Moody’s, which had said the sector could expect to face as much as $4.6 billion of losses from the wildfires that have ravaged the wine country area of California. Additionally, the Insurance Commissioner of California said that preliminary insured loss data counts $1.045 billion of claims already.
With now over 8,400 structures assumed destroyed by the California fires and even more damaged, the expectation is that the insurance and reinsurance industry faces its largest wildfire-related bill on record.
It’s important to note that this is not an Aon Benfield estimate of the losses from the recent wildfires, rather this is a representative of the reinsurance broker communicating the early expectations of the industry. Hence the actual bill for re/insurers could be higher or lower than the $5 billion to $8 billion range.
We also don’t know whether this is based on the estimates risk modelling firms provide directly to their clients, although that will likely become clearer once a catastrophe risk modeller puts out a first attempt to measure the impact of these wildfire events.
But even at the lower end of this early estimate, the loss to insurers and reinsurers will be the most significant the industry has ever experienced from the wildfire peril. So this could put some ILS contracts at risk if any ceding companies that have tapped the capital markets for reinsurance protection have a particularly high exposure to these wildfires, or if it impacts any retrocession arrangements.
Farmers Insurance, State Farm, Liberty, Allstate, Travelers, Nationwide Mutual, Chubb, AIG, Tokio Marine, National General, Allianz and QBE, are among the top property insurers in the state of California that are exposed to these fires, so will take a significant share of the eventual industry loss.
Update: Catastrophe risk modelling specialist AIR Worldwide has issued an estimate of insurance and reinsurance industry losses from wildfires in the northern areas of California, saying that the bill for the sector is likely to be from $2 billion to as much as $3 billion.