In this A.M.BestTV episode, A.M. Best Financial Analyst Lewis DeLosa and Industry Analyst Bobby Skrabal examine the impact of recent catastrophic wildfires in California, including how these fires might affect insurance underwriting, modeling and reinsurance. Click on http://www.ambest.com/v.asp?v=wildfires118 to view the entire program.

The October 2017 wildfires in Northern California were the costliest wildfires in terms of insured losses in U.S. history. Five of the top 20 most destructive California wildfires ever occurred in 2017 as well.

“2017 was one of the worst years in terms of natural catastrophe losses. The California wildfires definitely added to that insured loss total,” said Skrabal. “There have already been over $9 billion reported losses from the Northern California wildfires. The December wildfires should definitely push that total well above the $10 billion mark, making it by far the worst wildfire season in U.S. history….Expect insurers to raise rates in loss-affected areas or examine their terms and conditions for replacement cost values and living expenses, as well as re-evaluate their exposures in high wildfire risk areas.”

DeLosa addressed the issue of insurers having sufficient levels of reinsurance, as well as the impact this will have to reinsurance rates in California.

“The trend has been for primary insurers to retain more of that risk, which reflects the solid capitalization of the industry and its ability to more appropriately manage these risks in-house,” said DeLosa. “While rates are expected to go up, capital does remain abundant, from traditional reinsurers as well as alternative sources of capital.”

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