California Fair Plan issues $1bn funding call to insurers as LA wildfire losses mount

California’s insurance programme of last-resort – Fair Plan – has issued a call for $1bn from its insurance members so it can continue to meet claims following last month’s wildfires in Los Angeles. As at 9 February, Fair Plan had paid out more than $900m to policyholders for damages from the fires. It warned that it needs additional capital from its member insurers, which pay into the plan to ensure California’s residents can access property insurance, to continue meeting claims requests. Fair Plan covered 450,000 homeowners in California in 2024. The funding call is the first since the 1994 Northridge earthquake. While half of the $1bn funding call will be borne directly by the state’s insurers, California’s department of insurance said insurers could pass on the other half to customers through a temporary supplementary fee, but not in future rate hikes. Insurers have 30 days to meet the call. Following modelled estimates pegging the market’s insured losses from the LA wildfires at between $25bn and $45bn, US insurers are publishing preliminary estimates of their individual exposure to the event, with carriers warning of rate increases to match the growing nat cat risk in California. Travelers this week posted the largest individual loss estimate so far at $1.7bn pre-tax across its personal and commercial lines business. This figure includes its quota share with Fidelis as well as its own underwriting portfolio. The company said in January it had been “shrinking in California coming into the event” and was without an appetite for insuring high net worth homes of above $5m in the area. Chubb was the first insurer to estimate its loss from the LA fires at $1.5bn but it has yet to provide an update. State Farm, California’s largest home insurer, said the event is the costliest disaster in the company’s history. As of 1 February, it had paid more than $1bn in claims and will ultimately pay out significantly more, calling on the state’s insurance regulator to approve interim rate increases averaging 22% for homeowners. Arch Capital said based on an insured market loss of between $35bn and $45bn, its share of losses from the LA wildfires would be between $450m and $550m. AIG expects a similar size loss, at about $500m net, although the company said this week it is too early to assess the full impact from the event. CEO Peter Zaffino said the annual insured loss from wildfires in the US averaged $3.5bn since the turn of the century, although in just the past ten years it has more than doubled to $7.4bn, giving context to current industry-wide losses from the LA wildfires coalescing at about $40bn. Bermuda-based Lancashire Holdings estimates its net loss from the wildfires at between $145m and $165m, which it said would fall within its modelled range of loss for this type of cat event. It also assured shareholders that its reinsurance programme for large cat events will still allow it to deliver returns in 2025. Californian insurer Mercury General said gross losses from the LA wildfires will range from $1.6bn up to $2bn but its net loss is pegged at between $155m and $325m. The company added that it has yet to determine whether to designate the Palisades and Eaton fires as one or two events, which will affect its reinsurance recoveries.

California Fair Plan issues $1bn funding call to insurers as LA wildfire losses mount

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