Allstate Corp. expects net pretax catastrophe losses of $1.07 billion from the January wildfires in Los Angeles, according to a report from AM Best.
The estimate includes Allstate’s share of the California FAIR Plan’s $1 billion assessment and $1.4 billion in anticipated reinsurance recoveries, the company said.
The company reported about $1.08 billion in net pretax catastrophe losses for January. The number of Allstate Protection policies in force declined 0.5% last month to 37.4 million, compared with a year earlier. Growth in homeowners and other personal lines policies was offset by a decline in automobile and commercial lines policies.
Tom Wilson, Allstate’s chair, president and CEO, said that the cost of reinsurance will not be recovered. He also noted that the company has reduced its market share in California’s homeowners insurance sector from 12.6% in 2008 to less than 5.8% last year.
However, insurers reevaluating their position in the state isn’t unexpected.
According to Daniel Aldrich, co-director of Northeastern University’s Global Resilience Institute, insurers would examine these events in the context of broader climate-driven risks, which could affect their underwriting and pricing strategies nationwide.
The Los Angeles wildfires in January are deemed to be the most catastrophic wildfires in the state’s history. The wildfires ravaged 55,082 acres of land, intensified by the strong Santa Ana winds and severe dry conditions. The Palisades and Eaton fires were the most destructive, burning 23,400 and 14,000 acres, respectively.
According to a UCLA report, total property and capital losses impact of the wildfires could range between $95 billion and $164 billion, with insured losses estimated at $75 billion.
Zhiyun Li and William Yu of the UCLA Anderson Forecast said that the wildfires are also expected to cause a 0.48% decline in country-level GDP for the year, which is equivalent to about $4.6 billion. They also expect a total wage loss of $297 million for local businesses and employees in the affected areas.
And even though the wildfires have been extinguished, Californians are still expected to feel the impact of the wildfires. According to the report, without substantial and effective wildfire mitigation efforts and investments, Californians will face increasingly higher insurance premiums and growing health risks from wildfire-related pollution.
The LA housing market, especially for rental units, will also be increasingly unaffordable and insurance availability will have significant challenges.
