Lancashire anticipates up to $165m in losses from California wildfires

Lancashire Holdings has estimated its aggregate net ultimate losses from the recent wildfires in California at $145 million to $165 million.

According to the firm, this preliminary estimate has been derived from a combination of market data and assumptions, a limited number of provisional loss advice, limited client loss data and modelled loss projections.

As Reinsurance News has extensively covered, modelled insured loss projections for the recent LA wildfires vary. The highest loss estimate came from CoreLogic, which projected insured losses between $35 billion and $45 billion.

In comparison, the CEO of a large Bermudian reinsurer warned of industry losses as high as $50 billion.

As additional information emerges, Lancashire noted that its actual ultimate loss may vary from this preliminary estimate announced.

Meanwhile, this estimate is reportedly undiscounted after anticipated recoveries from Lancashire’s outwards reinsurance programme and the impact of outwards and inwards reinstatement premiums.

Alex Maloney, Group Chief Executive Officer, commented, “Our thoughts are with all those affected by the recent wildfires which wrought such devastation in California. Events like this show the value of (re)insurance products in both offering protection and in supporting people as they rebuild their lives.

“Given our strong earnings performance and capital generation in 2024 Lancashire remains extremely well capitalised to achieve its strategic ambitions. In addition, the aggregate reinsurance cover the Company has in place to protect against the frequency of large catastrophe events should allow Lancashire to deliver an attractive return for shareholders in 2025.

“We will provide a further update on our position regarding these losses, and further guidance for 2025, as part of the announcement of our results for the full year ended 31 December 2024 on 6 March 2025.”

In related news, Howden Re, the global reinsurance, capital markets, and strategic advisory arm of Howden, recently released a report on the protection gap following the California wildfires.

The report highlighted regulatory reforms, risk-based pricing, enhanced risk mitigation, and public-private collaboration as the “only viable path” to restoring stability in the state’s insurance market.

The California FAIR Plan Association, a consortium of all insurers licensed to provide property insurance in the state, has also received approval from Insurance Commissioner Ricardo Lara for an additional $1 billion in funds from its member companies. This will enable the Plan to continue paying claims after the Los Angeles wildfires.

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