During insurer Chubb Limited’s fourth-quarter 2024 earnings call, Chairman and CEO Evan Greenberg confirmed that the company expects $1.5 billion in net pre-tax losses from the recent Los Angeles, California wildfires.
Despite the scale of the losses, Greenberg does not anticipate a broader impact on property insurance pricing, emphasising that overall rates remain adequate.
“As the magnitude of this loss emerges and grows, more of it begins to find its way to reinsurance balance sheets, and into other balance sheets,” said Greenberg.
He continued, “The question will be, what is the ultimate size of loss, and where does it end up? That will determine whether it has a broader impact on overall property pricing, which in my judgement, overall is adequate. And this is a reminder of why the industry needs to maintain pricing adequacy.”
Greenberg then addressed the challenges in California’s insurance market, noting that conditions have only become more difficult over time. As a result, Chubb has been reducing its exposure in the state for some time.
“For example, in the area where the wildfires occurred, our exposure has been reduced by over 50%,” said Greenberg. “We’re not going to write insurance where we cannot achieve a reasonable risk adjusted return for taking the risk.”
He attributed these challenges to state regulations that limit insurers’ ability to set rates that fully reflect wildfire risks and rebuilding costs.
According to Greenberg, this suppression of pricing not only discourages insurers from operating in California but also weakens incentives for homeowners and businesses to invest in risk mitigation.
As insurers and reinsurers scale back their exposure, the state’s insurer of last resort has stepped in to offer more underpriced coverage—an approach Greenberg warned is unsustainable.
“One way or another, the citizens of the state pay the price for coverage,” he said, adding that while other states face similar pressures, California stands out in the severity of its market constraints.
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