Executives at global broking group Marsh McLennan (MMC) said today that although it’s too early to tell exactly what impact the recent Los Angeles, California wildfires will have on the property market, moving forward, the magnitude of industry loss could temper risk-adjusted reinsurance rate reductions witnessed at the January 1st renewals.
Marsh McLennan was the first of the large brokers to announce its results for the fourth quarter and full year 2024 today, reporting a strong performance across the business.
Following the release, executives held an earnings call with analysts and unsurprisingly, given the size of the expected hit to the insurance industry, which currently ranges between $25 billion and $50 billion, the LA wildfires were discussed.
“These events represent a profound human tragedy. Lives have been lost, and tens of thousands of people have been left homeless and hurting. Among those affected are Marsh McLennan colleagues and clients in the Los Angeles area, and our company is committed to doing everything we can to support them during this challenging time,” said Marsh McLennan President and CEO, John Doyle, in his opening remarks.
In terms of the impact on the insurance sector, Doyle noted that at more than $30 billion, the LA wildfires will be among the top 10 largest natural disasters in history, in terms of insured loss.
“The increasing frequency and severity of natural disasters, along with rising property values and continued development in catastrophe grown areas, underscore the need for greater resilience and risk mitigation planning.
“Marsh McLennan will continue to bring together stakeholders, including individuals, businesses, the insurance industry, and governments, to build the resilience to mitigate the devastating impact from these catastrophic events and to accelerate recovery,” added Doyle.
Later in the call, executives at the broker were questioned further on the wildfires, specifically what the impact might be to the property sector in the weeks and months ahead.
Providing the reinsurance perspective, Dean Klisura, President and CEO of Guy Carpenter, Marsh McLennan’s reinsurance broking arm, explained that the firm has established a dedicated wildfire task force comprised of its top meteorologists, cat modellers, analytics, claims colleagues, and brokers.
“It’s clear that many of our reinsurance clients will have losses resulting in claims to the reinsurance programs. As John noted, we’ve seen industry estimates expect the loss to exceed $30 billion, although we saw bigger numbers than that in the market yesterday being reported,” said Klisura.
“The impact on the reinsurance market is uncertain at this time and will certainly depend on the ultimate magnitude of the insurance loss. But I would say, David, at this stage, the risk-adjusted rate reductions that we witnessed in January 1 could certainly be tempered moving forward as we go into the April 1 renewal season,” he continued.
Overall, property catastrophe rates decreased at the 1.1 2025 renewals when compared with the gains seen at the 1.1 2024 renewals but do remain attractive to reinsurers as appetite was cited as up at Jan 1, although demand failed to meet this increased eagerness to deploy capacity from sellers, according to renewal reports from brokers.
Bermuda-based reinsurer RenaissanceRe’s CEO, Kevin O’Donnell, said yesterday that he expects the fires to drive up demand for reinsurance, but warned that property cat rates must stay firm or even increase in order for firms like RenRe to continue to have appetite to provide protection in the region.
It’s expected that the wildfires will lead to higher primary insurance and reinsurance fire rates in California, but it remains to be seen what impact a $30bn+ insured loss in the opening quarter of the year will have on rates at the April and key mid-year renewals, the latter of which are heavily focused on the U.S.
During the Marsh McLennan earnings call, Martin South, President and CEO of insurance broker Marsh, commented on the fires from a primary insurance perspective.
“The overall rates came down 2% in the fourth quarter. You have to put that in context – it’s focused on a large account segment, and it’s gone up one and a half times since 2012. We did see some rate decreases in the property book in the last quarter and slow down across the world,” said South.
“It’s really too early to say what this impact is going to have. It’s not a big commercial event for our clients. I think we’re going to have to wait and see. And our focus is really on making sure that our colleagues, our clients, are there and we’re providing the right advice for our high-net-worth clients, as they think about resilience and building forward. So, not market hysteria, that’s for sure,” added South.
For the communities devastated by the fires, rebuilding is now the focus. Doyle noted this and stressed that as a major risk advisor, the firm certainly has something to say about the future and efforts to build back with greater resilience.
“And, I would say, reading lots of comments about how to support the FAIR Plan, or how to create subsidies for insurance. Candidly, it’s the wrong conversation. The conversation we should be having really is about building greater resilience into these communities, rather than trying to find ways to subsidise insurance. That will lead to happier homeowners and residents of Southern California and other cat prone areas over time. And, of course, that conversation isn’t limited to Southern California.
“So, important steps need to be taken so that we’re not in this sad and devastating place again sometime soon,” Doyle said.
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