Los Angeles Area Wildfires Will Cause Record Insured Losses; Solutions to Address Insurability Are Needed

The ongoing Los Angeles area wildfires are expected to result in record insured losses more than doubling the $12.5 billion in losses caused by the 2018 Camp Fire in northern California. While the impact on property insurers is likely to be significant but manageable, the wildfires will worsen the ongoing crisis in the California property insurance market.

KEY HIGHLIGHTS
-- Los Angeles area wildfires have caused record property damage with insured losses that could reach more than $30 billion, making a negative but manageable impact on insurers' credit profiles.

-- Properties located in the wildland-urban interface are increasingly difficult to insure, and cause issues for the California property insurance market as a whole.

-- Reinsurance capacity is critical for direct carriers to be able to assume and price wildfire risk, but it is expected to become more expensive following this event.

"In the short term, insurance regulators need to allow for risk-based pricing as the departure of insurers from the market will be counterproductive," said Patrick Douville, Vice President Global Insurance and Pension Ratings. "This means that premiums are likely to increase, and affordability issues will continue, potentially affecting property values and leaving some homeowners without insurance."