Key points
- Analysts see US insurers re-evaluating California pricing
- Forecast for total economic losses as high as $150b
- California’s Insurance Commissioner uses moratorium powers
ISLAMABAD: As firefighters race to put out the wildfires raging in Los Angeles in the United States (US), insurers have already taken a hit from the economic toll of the historic catastrophe.
Shares of insurance companies tumbled on Friday, prompting analysts to ponder the disaster’s impact on US insurance companies – the largest in the world.
JP Morgan analysts doubled estimated insured damages on Friday to $20 billion amid speculations of the total economic loss from the fires shooting past $150 billion.
According to Reuters, Wells Fargo also expected similar insured losses and said the total economic hit from the disaster could be well above $60 billion.

However, the blazes have since burned for a third straight day on Monday, reducing whole neighbourhoods to smouldering ruins, levelling homes and leaving an apocalyptic landscape.
So where could this go from here and what toll it would have on US insurance companies?
US insurance companies
American insurance companies are massive entities and significant players in the US economy and global markets.
Companies like State Farm, Geico, Allstate, Progressive and MetLife are household names and together dominate the American market.
According to the National Association of Insurance Commissioners (NAIC) – the US standard-setting organisation that provides data, analysis and expertise to help insurance commissioners regulate the industry and protect consumers – the US insurance industry is one of the largest globally, with premiums written across all sectors (life, health, property and casualty) totalling over $1 trillion annually.
Companies such as the American International Group (AIG) have a strong international presence, making them key players on a global scale.
Public perception
However, the public perception of insurance companies varies widely as many customers feel that insurers are slow to pay claims or deny claims unjustly, especially after large-scale disasters like wildfires or hurricanes.
Their failure would have far-reaching economic effects.
Critical stability
To help provide critical stability amid the devastation caused by the fires, California Insurance Commissioner Ricardo Lara invoked moratorium powers to suspend all policy non-renewals and cancellations from insurance companies for one year, Reuters reported.
Lara also urged insurance companies to halt any pending non-renewals and cancellations issued to homeowners before the fires began.

“My primary concern at this very moment is to ensure that wildfire survivors receive the insurance benefits to which they are entitled to as soon as possible,” Lara said at a press briefing.
The Pacific Palisades area is one of the most expensive neighbourhoods in the US, home to Hollywood A-Listers and multimillion-dollar mansions. Ahead of this week’s disaster, its insurance costs were among the most affordable in the country, according to a Reuters analysis.
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But that is likely to change after the scale of losses anticipated in the wildfires now ringing Los Angeles, as well as regulatory changes enacted late last year.
“While leading US property insurers are in good financial condition, the California property insurance market has been challenging… leading many insurers to re-think their product offering, including an outright exit from the market,” Morningstar DBRS wrote in a client note.