Analysts at Berenberg believe the California wildfires are unlikely to result in a material impact on 2025 earnings for the reinsurers it covers.
In a recent report, Berenberg highlighted three key reasons why the impact of the current wildfires on re/insurers is expected to be less severe than the 2018 Camp and Woolsey fires.
Firstly, for reinsurers, the attachment points are significantly higher now than they were in 2018.
Secondly, so far, the wildfires have predominantly impacted residential properties, which tend to have narrower reinsurance coverage than commercial or industrial structures.
Finally, many residential structures in the heavily affected Palisades area are insured under the FAIR Plan pool system rather than by individual private insurers, spreading the losses broadly among participating insurers, which include California’s main providers.
For context, the 2018 Camp and Woolsey fires in Northern and Southern California caused an industry loss of USD 16 billion. This resulted in initial loss estimates of USD 375 million for Swiss Re, EUR 500 million for Munich Re, EUR 193 million for Hannover Re, and EUR 99 million for SCOR, which was later settled at EUR 87 million.
Comparatively, Berenberg analysts highlighted that reinsurers would only face similar losses from the current wildfires if there had been no changes to their underwriting practices.
Berenberg estimates the current fires could result in losses of EUR 220 million for Munich Re, USD 160 million for Swiss Re, EUR 50 million for SCOR, and EUR 180 million for Hannover Re.
While these figures may appear significant relative to 2025E pre-tax earnings, they fall within the large loss budgets of these reinsurers and would only impact earnings if they exceed these budgets.
In terms of combined ratio costs, the estimated impacts are around 0.7% for Swiss Re, 0.8% for SCOR and Munich Re, and 1% for Hannover Re—equivalent to approximately 8% of each reinsurer’s large loss budget.
As we wrote earlier, the LA wildfires have now destroyed more than 10,000 structures, with insured losses seen at between $10 billion and $20 billion.
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