Barclays released an analysis estimating the financial impact of the California wildfires on the insurance industry. The bank projects industry-insured losses to range between $17 billion and $30 billion, making this the largest wildfire event on record.
Barclays released an analysis outlining the potential financial impact of the California wildfires on the insurance industry, projecting industry-insured losses to range between $17 billion and $30 billion. This event is anticipated to be the largest wildfire on record, with an estimated 10,000 to 25,000 structures potentially destroyed. For U.S. (Re)insurance equities, Barclays anticipates a manageable impact at the lower end of these loss estimates.
The most affected companies are expected to be primary insurers like Chubb and Travelers. In the European (Re)insurance sector, the analysis suggests a substantial loss from the wildfires could disrupt market dynamics ahead of the June-July renewals, despite the expectation of a high-teens reinsurance return on equity (ROE) in the first half of 2025. However, Barclays strategists stated that this wildfire event is “unlikely to change the downward direction of prices.” From a credit standpoint, Barclays assesses the wildfires as a manageable risk for the financial strength of US property and casualty (P&C) insurers. They cite the industry's robust capitalization of over $1.1 trillion in regulatory capital. Most insurers offering homeowners insurance in California are geographically diversified, which helps mitigate loss volatility. Furthermore, the trend of insurers withdrawing from the California homeowners market due to inadequate pricing may reduce their share of industry losses. S&P and Moody's commented on the situation. S&P doesn't anticipate the wildfires to trigger rating changes, while Moody's highlights that recent underwriting actions and tailored coverage terms should mitigate insured exposure to wildfire losses. European reinsurers, on the other hand, might see a more pronounced effect on their capital positions due to the intensity of the wildfires, the high value of insured assets, and the prevalence of wildfire insurance
CALIFORNIA WILDFIRE INSURANCE INDUSTRY BARCLAYS LOSS ESTIMATES REINSURANCE CREDIT RISK UNDERWRITING ACTIONS
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