Forecasting that the ongoing Los Angeles wildfires will drive insurance and reinsurance industry losses of $20 billion, analysts at KBW have estimated net losses from the fires for numerous insurance carriers, based on individual firms’ 2023 market share of exposed lines of business, suggesting reinsurance recoveries for some under their per-occurrence towers.
For the companies in KBW’s universe, analysts warn of net primary LA wildfire losses of $20 billion, which includes FAIR Plan assessments and reinsurance reinstatement premiums, and which is based on individual companies’ market shares of personal and commercial property and auto physical damage losses.
“At this point (critically, the event is ongoing), we believe that primary insurers will bear most of the wildfire losses, and that these losses will mostly be large but manageable. We consequentially don’t expect the wildfires to materially change the trajectory of property catastrophe reinsurance pricing,” analysts said.
Of course, with the fires still burning, there’s potential for these figures to change in the coming days and weeks, but currently, KBW assumes that auto physical damage will account for 10% of the overall insured loss, commercial property 30%, and personal property 60%.
KBW has used 2023 direct written premium data to estimate individual carriers’ losses based on their direct market shares of the lines of business exposed to the fires, but warns that this could understate individual companies’ commercial and/or personal E&S property market shares. Further, the data could also overstate individual homeowners insurers’ market shares, says KBW, while the wealth of regions hit by the fires suggests that statewide market share data could underestimate the high net-worth homeowners insurers’ exposure, and similarly overestimate the standard homeowners’ insurers exposure.
Other caveats include KBW’s use of individual companies’ most-recently disclosed reinsurance per-occurrence attachment points, which analysts say probably mostly held steady at the 1.1 2025 renewals. Also, given the proximity in time and geography of the fires, KBW assumes that the current wildfires will constitute a single event for reinsurance retention purposes.
Regarding California’s FAIR Plan, which can assess California’s insurers for net losses that exceed its current capital, KBW explains that in March 2024, it was reported to have surplus of about $200 million and total gross exposure of $311 billion, although analysts believe both of these figures have likely since grown. Under the Plan, personal insurers can pass on half of their first $1 billion of personal property assessed losses, commercial insurers can pass along half of their first $1 billion of commercial property assessed losses, and carriers writing both personal and commercial property can pass along half of their first $2 billion of assessed losses to their policyholders.
“Above those limits, they can pass along all of the losses, while retained losses would generally be covered by relevant reinsurance,” analysts explain.
According to KBW’s data, primary insurers Allstate, Assurant, Lemonade, and American Financial Group are estimated to incur net losses from the LA wildfires at or above the retention of their respective per-occurrence reinsurance towers, while net losses for others such as AIG are expected to be close to retention levels.
For Allstate, KBW estimates a gross loss of $910.3 million, driven by the personal property line, and a net loss of $833.3 million from the fires, against a reinsurance retention of $833 million.
Assurant has a per-occurrence reinsurance retention of $150 million and KBW expects the insurer to incur net losses of $150 million from the event, with gross losses of $189.8 million, of which more than $104 million is expected to come from the commercial property line of business.
The majority of Lemonade’s estimated $102.7 million gross loss is expected to come from the personal property line, and KBW estimates net losses of $67.2 million, with Lemonade’s reinsurance retention sitting at $67 million, although this includes quota share coverage.
Analysts estimated gross losses from the wildfires of $79.1 million for American Financial Group, driven by commercial property losses, and pegs net losses at $70 million, which is the same as the company’s per-occurrence reinsurance retention.
For numerous other insurers the estimated net loss is pretty close to their reinsurance retention, although for others, such as Travelers, it’s some way off as their retentions are high under their occurrence towers. However, many of these insurers could also have aggregate reinsurance, and it’s plausible that the wildfires have eroded some of the retention under these towers.
“Even with total insured losses at or above $20 billion, the losses should still trail last year’s Hurricane Milton’s mid- to upper-$20 billion range, which reinsurers essentially shrugged off during the January 2025 renewal,” say analysts. “Unless the fires’ insured losses rise dramatically, reinsurers’ collective exposure to the wildfires should be well below their share of Hurricane Milton losses; the top-20 California homeowners insurers’ median surplus at 9/30/24 was almost $9.5 billion, over 30x the top-20 Florida homeowners insurers’ median surplus of under $300 million.”
“The wildfires should rebolster reinsurers’ resolve regarding policy terms and conditions beyond attachment points, especially for things like hours clauses used to determine whether losses like the wildfires represent a single or multiple events,” KBW said.
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