As the fires are not yet contained and the forecasts predict more dangerous winds, it is still too early to draw conclusions.
According to initial estimates, insured losses from the California fires could reach $20 billion. For comparison, Hurricane Katrina cost $60 billion in 2005 and the insurance sector as a whole $140 billion in 2024. The companies we cover have very little (if any) exposure. Reinsurers are likely to receive claims, but we expect them to remain within the 2025 budget. Ultimately, a substantial portion of the losses will have to be covered by U.S. taxpayers.
According to California firefighters, the ongoing fires have destroyed more than 10,000 properties on more than 40,000 acres and have unfortunately killed more than 20 people. As the fires are not yet contained and the forecasts predict more dangerous winds, it is still too early to draw conclusions. However, estimates of economic losses already exceed $100 billion. This is because of the high average home prices in the affected areas (e.g., $3.5 million per home in Palisades). The economic losses are comparable to the approximately $300 billion in damage caused by Hurricane Katrina in 2005 or the $320 billion in total economic losses reported by insurers for all of 2024.
Reinsurance companies are likely to receive compensation, but we would be surprised if it exceeds $50 million to $150 million.
Estimates of insured losses range up to $20 billion. Previous large wildfires in California resulted in insured losses of $4.2 billion (2018 Woolsey), $8.7 billion (2017 Tubbs), and $10 billion (2018 Camp Fire). For comparison, insured losses from Hurricane Katrina were $60 billion and full-year insured losses were $140 billion in 2024.
While these numbers are significant, we do not expect them to have a significant impact on the companies we cover. Indeed, some properties in affected areas may be uninsured or only partially insured (many carriers stopped providing insurance in California, and insurance costs increased significantly after the wildfires of 2017/2018). Some high net worth individuals may be partially self-insured, and the market share (if any) is less than 1%.
We do not cover the companies that have the highest market share in the homeowners market – State Farm, CSAA Insurance Exchange and Liberty Mutual. Farmers, which is managed but not owned by Zurich (Hold, Price/Target: CHF531/550), has a 14% share. Reinsurance companies are likely to receive compensation, but we would be surprised if it exceeds $50 million to $150 million. Ultimately, a substantial portion of the losses will have to be covered by American taxpayers.
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