Based on preliminary insured loss estimates, Moody’s has said it expects the reinsurance sector to assume at least 30% of total insured losses from the devasting Palisades and Eaton wildfires in Los Angeles.
As we’ve extensively covered, the highest loss estimate for the wildfires so far comes from CoreLogic, at $35 to $45 billion. More recently, Verisk pegged insured losses at between $28 and $35 billion, and Karen Clark & Company has estimated that the hit to the industry will be close to $28 billion.
Moody’s noted in its new report that losses will be broadly distributed among the global reinsurance sector, though firms with exposure to homeowners insurers with high concentrations of business in California, and the California FAIR plan, could see larger losses relative to the peer average.
For context, Moody’s also said that most insured losses will be shared among standard and E&S homeowners insurers, the California FAIR Plan, and commercial property insurers, with smaller losses for fine art and collectables, and auto insurers.
According to the rating agency, reinsurers will see claims from primary companies under a variety of reinsurance coverages, including quota-share treaties and excess of loss property catastrophe coverages, as well as facultative and per-risk reinsurance.
“Given the significant increase in the attachment points of most property catastrophe reinsurance coverages since 2023, we expect primary insurers will retain more of the losses than they would have a number of years ago,” Moody’s added.
While the impact on reinsurance pricing is still difficult to determine, the rating agency has suggested that the wildfires are likely to provide some support to property catastrophe pricing during the mid-year reinsurance renewal periods, as the wildfire losses could erode significant portions of annual catastrophe budgets prior to the 2025 Atlantic hurricane season.
“We also expect wildfire-exposed accounts to see significant scrutiny upon renewal as reinsurers recalibrate their risk assessment and appetites, pricing levels, and terms and conditions,” Moody’s observed.
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