Insurers with significant exposure to California's homeowners' market faced a sharp sell-off on Friday as the Los Angeles wildfires wreaked havoc across the region. The Palisades Fire, the largest among five active blazes, has swept through Pacific Palisades, an affluent area where median home prices exceed $3 million, according to JPMorgan. Major insurance carriers, including AllState, Chubb, and Travelers, stand to bear the brunt of insured losses, potentially exceeding $20 billion.
This week's fires could surpass the 2018 Camp Fire, which resulted in $12.5 billion in insured damages, marking it as the costliest in U.S. history. With the Palisades Fire alone scorching more than 17,000 acres and destroying over 1,000 structures, authorities fear it might become the most destructive in California's history. The financial markets reacted swiftly; shares of AllState and Chubb dropped by 4% during morning trading, while AIG and Travelers saw declines of about 2%.
The extent of the damage prompted insurance companies to request Southern California Edison preserve evidence related to the catastrophic fires. Moody's Ratings anticipates insured losses could run into billions due to the high value of homes and businesses in the affected areas. JPMorgan's analysis suggests that such rising loss estimates could lead to reinsurance attachments being breached for various insurers.
The financial impact extends beyond just the primary insurers. Arch Capital Group and RenaissanceRe Holdings also experienced declines of 2% and 1.5%, respectively. Chubb may face particularly high exposure due to its focus on high-net-worth clients in this region, according to Wall Street analysts.