Staff Reporter
U.S. property and casualty insurance stocks took a dip in premarket trading on Friday, following devastating wildfires in Los Angeles that have claimed at least 10 lives and destroyed nearly 10,000 structures. Five fires are still raging into a third night.
The Palisades Fire, located between Santa Monica and Malibu, along with the Eaton Fire near Pasadena in the east, have become the most destructive wildfires in Los Angeles history.
Insurance companies are bracing for catastrophe-related claims that could reach billions of dollars, with analysts predicting this disaster may be the costliest ever recorded in California.
Moody’s Ratings noted that insured losses from the wildfires could exceed several billion dollars, reflecting the high value of homes and businesses in the impacted areas. This situation is likely to result in significant losses for property and casualty insurers with a substantial presence in the homeowners and commercial property markets in Los Angeles.
Analysts at Morningstar DBRS estimate insured losses could surpass $8 billion based on initial assessments, while J.P. Morgan forecasts losses could reach as high as $10 billion.
In response, sector leader Travelers saw a 4% decline in premarket trading. Mercury General dropped a staggering 32%, while Allstate, Chubb, and AIG experienced declines ranging from 4% to 6%.
European insurers also saw declines, with Beazley, Lancashire, and Hiscox each falling around 3%, making them the biggest losers among UK-listed large and mid-cap companies.
The Pacific Palisades area is known as one of the most expensive neighborhoods in the U.S., home to Hollywood stars and multimillion-dollar mansions. Prior to this week’s wildfires, insurance costs in the area were among the most affordable in the nation, according to a Reuters analysis.
However, experts believe this will likely change due to the anticipated scale of losses from the wildfires surrounding Los Angeles and recent regulatory changes implemented late last year, as reported by four analysts earlier this week.
