US Insurance Stocks Slump as L.A. Wildfire Losses Estimated as High as $20 Billion

 

 

Insurance stocks slumped in the US stock market on Friday (Jan. 10) because the wildfires in Los Angeles might cause up to $20 billion in insured losses, possibly the disaster with the largest loss in California history.

 

The fires have killed 10 people and destroyed nearly 10,000 buildings so far.

 

To stabilize the status quo, California Insurance Commissioner Ricardo Lara moved to suspend all policy non-renewals and cancellations from insurers for one year. Lara also prompted insurers to stop issuing any non-renewals and cancellations to homeowners before the fires began.

 

More importantly, given the continuous fires and regulatory reforms in 2024, uncertainty in California's insurance market has risen steeply. The challenges in California's market have led many insurers to reconsider their product strategies, including the market exit, Morningstar DBRS reports.

 

Analysts assessed the financial impact of the fires. J.P. Morgan doubled its insurance loss forecast to more than $20 billion. Wells Fargo said economic losses from the disaster could total well over $60 billion.

 

Moody's Ratings noted it would take more time to determine the number of the insurance losses but the California wildfires could be the costliest in the state's history.

 

Analysts at Jefferies said several US leading insurers have dramatically reduced their exposure to California because of costly and unquantifiable wildfire risks and the state's tight pricing controls.

 

Harsh and frequent natural disasters have accelerated insurers' exit from high-risk California and Florida.

 

 

Individually, in the US market, the insurance industry leader Travelers $TRV closed down 4.26% Mercury General $MCY, a Los Angeles-based insurer, plunged 19.87%. Allstate Corp $ALL dropped 5.64%.