Moody’s ups California wildfire estimate to US$2.5 billion

Rating agency Moody’s predicts insured losses stemming from the wildfires that raged through Southern California this fall will be in the US$2.5 billion-US$3.5 billion range.
Nonetheless, Moody’s does not expect the fires to materially impact the ratings or the overall outlook for the U.S. personal lines market, although individual insurers could be impacted.
As for early industry estimates, which put the wildfire price tag at US$2 billion, Moody’s says claims counts have continued to climb and damage from smoke has been difficult to estimate.
An interesting situation will arise, however, depending on whether the fires are classified as one insured event or multiple events, as this will impact the ultimate amount of reinsurance applicable to losses. However, Moody’s expects most reinsurance will attach above or near the upper-end of loss estimates, and thus primary insurers will bear much of the burden.
“Moody’s estimates that catastrophe losses in 2003 will be significantly higher than in prior years due to the combined effect of losses from the California wildfires, Hurricane Isabel and widespread Midwestern storm losses earlier in the year,” notes a press release. “These losses have handicapped the ability of many personal lines insurers to achieve anticipated earnings growth following recently implemented higher rates and underwriting improvements.”