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Lloyd’s Unlikely to Face Major Exposure to California Wildfires

Lloyd's wildfire exposure limited to high-value home policies, says report.
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According to a new report from Alpha Insurance Analysts Limited, Lloyd’s is unlikely to have much direct insurance exposure to the California wildfires, other than through some specialist high value homes property binders.

As per new estimates, the LA wildfires are set to cause economic losses as high as $275 billion while various broker reports and underwriter comments have suggested that insured losses could range between $25 and $40 billion, potentially tightening the market for the remainder of the year.

“The insured loss forecast puts the cost of these fires well above those from the California wildfires of 2018 which according to Munich Re saw a combined insured loss of $18 billion, which equated to a loss of £700 million for Lloyd’s at the time. Currently, the wildfires are still burning making it difficult to ascertain a total loss number for the Lloyd’s market,” Alpha Insurance Analysts report said.

The Lloyd’s members’ agency also highlighted significant advancements in wildfire data analytics by the market’s underwriters. These improvements reportedly enhance their ability to assess and manage wildfire exposures. However, the market may still face exposure to these fires on the reinsurance side, depending on the final scale of insured losses.

“Early conversations with our syndicates suggest that those with a large US catastrophe reinsurance account are likely to put up a sizeable reserve for these wildfires but other syndicates will have little or no exposure. We believe that the majority of the costs of these wildfires will attach to our syndicates’ 2024 year of account,” Alpha Insurance Analysts added.

The Lloyd’s members’ agency’s report concluded, “Our 2024 portfolio suffered a small loss from the Baltimore Bridge collision and larger losses from Hurricanes Helene and Milton but otherwise, this well-rated year has seen a relatively low level of attritional losses. Typically one might expect Lloyd’s to have up to a 10% share of the total insured loss.

“If this was the case, an insured loss of up to $3bn would represent c5% of premium written and, therefore, we still believe the 2024 year of account remains capable of producing a good profit for our portfolio.

“With a loss like this falling so early in 2025, it is likely to help to tighten the market for the remainder of the year.”

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