
Moody’s – California fires now a major loss
The California wildfires are a major insured and economic loss, with significant losses expected to be retained by primary insurance providers, reinsurance coverage likely to be triggered, and the Insurance-linked Securities (ILS) market keeping a close eye on wildfire-exposed bonds, according to the latest blog on the fires by Moody’s.
“Already the most destructive wildfire event in Los Angeles County history, certainly now in the top three deadliest fires in the state, and potentially the costliest in US history, it is hard to keep up with the latest extent of the destruction from now six separate wildfires,” wrote Firas Saleh, director-North American wildfire models at Moody’s.
As private insurers have withdrawn from California, the state-backed FAIR Plan has seen a remarkable surge in policies and total exposure, according to Moody’s.
Moody's said that as of September 2024, exposure in Los Angeles County was $112.2 billion, representing approximately 23.1% of the entire FAIR portfolio and a year-over-year growth of 53%.
Between September 2020 and September 2024, FAIR residential total exposure in Pacific Palisades ZIP Code 90272 jumped approximately 576%, from $436.2 million to $2.95 billion, while commercial total exposure increased by about 2,770%, from $8.46 million to $241.5 million.
Limits to FAIR coverage suggest challenges from potential underinsurance and coverage gaps; i.e., the median listing price of homes in the Pacific Palisades is $4.5 million, beyond the $3 million FAIR Plan limit.
Recent California regulatory changes, allowing the use of catastrophe models in the ratemaking process, aim to help provide needed market stability and improved insurance accessibility by allowing insurers to offer policies better reflecting current wildfire risk and incentivising broader community resilience and adaptation efforts, said Moody's.
Moody's has not yet provided an estimate for insured losses, or for economic losses/property damage. Those estimates will be shared at a later date.
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