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Insured California wildfire losses may reach $10bn, says Credit Suisse

14th November 2018 - Author: Matt Sheehan

A preliminary estimate from Credit Suisse has put industry losses related to the recent Camp, Woolsey and Hill Wildfires in California in the range of $5 billion to $10 billion.

wildfireThe three fires sprang up in the Butte and Ventura Counties on November 8 and have since collectively burned through 232,151 acres and 8,345 structures, with the Camp Fire becoming the most destructive and deadly wildfire in California’s history.

Credit Suisse’s loss range compares with other preliminary estimates from Morgan Stanley, who put insured losses from the Camp Wildfire at between $2 billion and $4 billion, and Moody’s, who put losses from the Camp and Woolsey Wildfires at between $3 billion and $6 billion.

The Hill Fire is now largely contained, but the Camp Fire is just 35% contained and continues to threaten 15,500 structures, while the Woolsey Fire is 47% contained and threatens a further 57,000 structures, many of which are in the affluent Malibu area.

However, Credit Suisse also claimed that, even if the wildfires are contained at a much slower pace than expected, losses are unlikely to pull any re/insurers into the red during the fourth quarter of 2018, as insured losses will still be below the $15 billion incurred following the wildfires in Q4 2017.

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The firm also pointed out that its updated Q4 catastrophe loads only include a small buffer for additional cat events because historically less than 15% of Q4’s losses occur after November 15, as the majority of Q4 losses are typically hurricane related.

Credit Suisse estimates that 86% of the insured wildfire losses will arise from homeowners policies, given the impact of the Camp Fire on the low-income retirement community in Paradise, Butte County, while 13% will come from commercial and 1% from private automobile.

Of the insurers covered by Credit Suisse, the firm said that AIG, Allstate and Cincinnati Financial are the only companies that would benefit from any reinsurance related to the wildfires.

For insurers with reinsurance operations, Credit Suisse said that Everest, Arch Capital Group and W.R. Berkley were likely to be most exposed to the wildfires, and expects them to incur 1.2%, 0.3% and 0.05% of total industry losses, respectively.

Additionally, in the event of a $10 billion industry loss, Credit Suisse said that Allstate could incur losses of $549 million, Travelers $358 million, Everest $115 million and Chubb $112 million.

Based on its analysis of Q4 catastrophes to date, Credit Suisse is also lowering its quarterly earnings per share estimates by an average of 17% for impacted insurers in its coverage.

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