Wildfires could cost insurers $5bn to $10bn: Credit Suisse analysts

Equity analysts from investment bank Credit Suisse believe that ongoing California wildfire outbreaks could cost the insurance and reinsurance industry between $5 billion and $10 billion, although they do not believe this would be sufficient to push any of the major insurers they cover to a fourth-quarter loss.

The analysts are referring to the trio of wildfires in northern and southern California, the Camp, Woolsey and Hill fires.

The estimates are starting to come in, as analysts get to grips with the potential exposure for insurance and reinsurance interests in the area.

Earlier today we reported that Moody’s had estimated an industry insured loss of between $3 billion and $6 billion for the wildfires, which as we explained in the article we would see coming out towards the higher-end once all insurable losses were considered (automobiles, demand surge, business interruption and additional living-expense claims.)

So the Credit Suisse analysts estimate of a $5 billion to $10 billion industry loss from these three wildfires is considerably higher than Moody’s, suggesting more potential for impact to reinsurance and ILS interests.

But with all the other loss vectors taken into account and once the final damage is understood, it seems reasonable to assume the bill will settle in the lower half of that range at the moment.

Estimates of property damage in the expensive areas around Malibu from the Woolsey fire remain uncertain for now and should the figures here rise it could hike the eventual industry loss significantly, given the much higher average property value than in the north where the Camp wildfire is burning.

While the wildfire losses are unlikely to put any of the insurers Credit Suisse tracks into the red for Q4, the analysts do note that catastrophe budgets for the quarter are likely to be utilised heavily and some will without doubt call on reinsurance for support, including perhaps the big players like AIG, Allstate and Cincinnati Financial.

Also read:

Wildfires to drive up to $6bn industry insured loss – Moody’s.

Wildfire losses to hit record in 2018, pricing needs to change: A.M. Best.

Stone Ridge & CATCo fund prices dented by California wildfire threat.

California wildfires destroy more property, but industry losses uncertain.

Cat bond price volatility & discounts expected from wildfires: Plenum.

California wildfire most destructive ever, multi-billion losses expected.