Allstate Estimates $1.07 Billion in Losses from January Wildfires
Allstate Corp. anticipates a net pretax catastrophe loss of $1.07 billion stemming from the January wildfires in Los Angeles. This figure, according to a report from AM Best, incorporates Allstate’s portion of the California FAIR Plan’s $1 billion assessment, combined with anticipated reinsurance recoveries of $1.4 billion.
The company reported approximately $1.08 billion in net pretax catastrophe losses for January. Concurrent with these losses, Allstate’s policy count saw a slight decrease; the number of Allstate Protection policies in force declined 0.5% last month, totaling 37.4 million compared to the previous year. While homeowners and personal lines policies experienced growth, this was offset by declines in automobile and commercial lines policies.
Tom Wilson, Allstate’s chair, president, and CEO, noted that the company will not be able to recover the cost of reinsurance. He further pointed out a significant reduction in the company’s market share within California’s homeowners insurance sector, decreasing from 12.6% in 2008 to under 5.8% last year.
However, insurance companies reevaluating their presence within the state comes as no surprise. Daniel Aldrich, co-director of Northeastern University’s Global Resilience Institute, explained that insurers are examining these events within the context of larger climate-driven risks. These risks may affect their underwriting standards and pricing strategies across the nation.
Wildfire’s Impact on Los Angeles
The January wildfires in the Los Angeles area have been classified as the most catastrophic in the state’s history. The blazes consumed 55,082 acres of land, exacerbated by strong Santa Ana winds and dry conditions. The Palisades and Eaton fires were particularly destructive, burning 23,400 and 14,000 acres, respectively.
According to a UCLA report, the total property and capital losses stemming from these wildfires could range between $95 billion and $164 billion, with insured losses estimated at $75 billion. Zhiyun Li and William Yu from the UCLA Anderson Forecast projected that the wildfires are also expected to cause a 0.48% reduction in the country’s GDP for the year, corresponding to about $4.6 billion. Furthermore, they anticipate a total wage loss of $297 million for local businesses and employees in the affected areas.
Even as the fires are extinguished, Californians are expected to continue feeling the impact of the wildfires. The report suggests that without substantial and effective wildfire mitigation efforts and investments, Californians will face higher insurance premiums and elevated health risks from wildfire-related pollution. The LA housing market, especially for rental units, will also become increasingly unaffordable, and insurance availability will face significant challenges.
