U.S. insurance companies face billions of dollars in Los Angeles wildfires
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They said this week that major insurers face billions of dollars in damage caused by Los Angeles wildfires, despite falling customers in California before the disaster.
AIG and Allstate, also national insurance companies, warn of losses even though they have cut exposure in the state in recent years.
The New York-based insurer said Tuesday that AIG is expected to lose about $500 million in fires, which destroyed more than 16,000 homes and businesses in January. This is after a sharp decline in 2022, when the company stopped offering new policies to most homeowners in California to focus on businesses and the state’s wealthiest residents.
Travelers also said Tuesday that the fire was expected to lose $1.7 billion, while Zurich-based Chubb set its losses at $1.5 billion last month. Allstate, which announced a $1.1 billion loss last week, said its California market share has halved since 2008.
Risk modelers say wildfires will cost the global insurance industry more than $250 billion in total.
The wide range of losses highlights the scale of the crisis in the California insurance market, where insurers fled due to strict consumer regulations and more serious natural disasters.
In recent weeks, insurers have stressed that they are avoiding higher spending by withdrawing policies in risky areas.
“In areas where wildfires occur, our exposure has been reduced by 50%,” Chubb CEO Evan Greenberg told investors last month. “We will not adjust for the inability to obtain reasonable risks.” Write insurance after the income.”
Insurance companies say California’s consumer protection laws have become too heavy, preventing them from getting enough profits to operate in the state – ultimately making residents more exposed.
According to the reinsurance division of British broker Howden, the average homeowner premium in California rose only 2.6% per year between 2016 and 2023, after taking into account construction inflation.
The number of policies written by California “admitted” insurance companies fell by 340,000 from 2019 to 2023, Holden’s report shows.
AIG’s approximately $500 million loss stems in part from an easily regulated “unacceptable” market that is not subject to price regulation by insurance specialists.
California’s largest private insurer, State Farm, is seeking an emergency of 22% compared to state insurance regulators to help offset the bill with the fires in January.
The California Fair Plan is a private vault established by the state that will charge $1 billion from insurers doing business in the state, the insurance specialist said Tuesday. In turn, insurance companies are allowed to pass half of their assessments to their clients.
