Moody's assesses California's P&C, commercial property insurers amid wildfire disaster
Jan. 12, 2025 4:15 PM ET
By: Liz Kiesche, SA News Editor
 Apu Gomes/Getty Images News
The Los Angeles area wildfires, ravaging some of the most expensive real estate in the country, have already claimed at least 16 lives. That figure is likely to climb as investigators comb through the wreckage.
For property & casualty insurers, the disaster is expected to rack up losses in the billions, and may be the nation's most costly fire ever.
"We expect insured losses to run well into the billions of dollars, given the high value of homes and businesses in the affected areas, and to cause large losses for P&C insurers with significant homeowners and commercial property market share in Los Angeles," Moody's vice president and senior credit officer Jasper Cooper wrote in research report on Thursday.
On Thursday, J.P. Morgan increased its estimate for insured losses from the fires to more than $20B, up from an estimate of almost $10B a day earlier.
Losses will be borne by standard homeowners insurers, insurers specializing in high-value excess and surplus lines (E&S) homeowners policies, the California FAIR Plan, and commercial property insurers. Reinsurers will also assume losses through quota share, per-risk, and excess of loss contracts, Cooper noted.
The credit rating company listed the top private insurers for homeowners' and commercial policies in the state. The publicly traded companies with the most exposure to the California homeowners insurance policies are:
- Mercury Global (NYSE: MCY) with $839M in direct premiums written,
- Allstate (NYSE: ALL) with $792M DPW, and
- Travelers (NYSE: TRV) with $805M DPW.
The industry direct premiums written for California homeowners totals $14.0B. The report didn't provide the companies' market share by the affected areas.
The top publicly traded commercial property insurers in the state are:
- Travelers (NYSE: TRV) with $889M of DPW,
- Chubb (NYSE: CB) with $785M in DPW
- AIG (NYSE: AIG) with $587M in DPW,
- CNA (NYSE: CNA) with $501M DPW,
- Berkshire ( BRK.B) ( BRK.A) with $499M, and
- Zurich ( OTCQX:ZURVY) ( OTCQX:ZFSVF) with $415M.
The industry direct premiums written for commercial property insurers in the state is $14.1B.
The biggest private homeowners insurers, though, are mutual companies, topped by State Farm ($2.75B DPW), Farmers ($2.05B), and Liberty Mutual ($908M). The top private commercial property insurers are Farmers ($1.03B) and Liberty Mutual ($856M).
Underscoring the rising costs for insuring properties for damage from wildfire and severe weather, California's FAIR plan, the state-run insurer of last resort for homeowners and businesses that can't obtain coverage in the private market, has grown quickly, Moody's noted. Pacific Palisades, the site of one of the biggest southern California wildfires, is the FAIR Plan's fifth-highest wildfire exposure concentration, with ~$5.9B of exposure, the credit reporting company said.
"It will take weeks or months to determine the magnitude of the insured damages, but the Los Angeles wildfires are likely among the most costly wildfires in the state's history," Moody's Cooper said. Indeed, taking a broader view of the total economic cost, Accuweather hiked up its estimate of the damage to $135B-$150B, as of Jan. 9, 2024, which would make it the nation's costliest fire.
Taking a purely quantitative look at P&C insurer stocks, the SA Quant system ranks Allstate (NYSE: ALL), Travelers (NYSE: TRV), Mercury General (NYSE: MCY), and Progressive ( PGR) as Strong Buys. SA Analysts' top picks are Chubb (NYSE: CB) Arch Capital ( ACGL), and American Financial Group ( AFG). And Wall Street analysts like Erie Indemnity ( ERIE), Tokio Marine Holdings ( OTCPK:TKOMY), and Kemper ( KMPR) the best. |
