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U.S. primary carrier Farmers Insurance Group has announced that initial estimates point to an expected loss of $600 million for the Los Angeles wildfires, net of its per-occurrence reinsurance coverage and gross of tax, and a roughly $250 million reinstatement premium payment.
This $600 million net loss estimate follows the $1.6 billion to $2.15 billion gross loss range provided by Farmers previously. Reinsurance recoveries have brought down the ultimate loss for the insurer, although it’s worth noting that the estimate does exclude the company’s share of losses to the California FAIR Plan.
In terms of what this might mean for the company’s Topanga Re Ltd. (Series 2021-1) catastrophe bond, recall that soon after the wildfires in Southern California, Farmers’ saw the indemnity per-occurrence Class A notes marked down by as much as 20%, as these notes were viewed as one of the indemnity per-occurrence deals that faced the highest risk of possible losses from the event.
We then reported that these Class A notes were marked down further, with sources confirming them marked down as low as for bids of 20 cents on the dollar on some pricing sheets.
Following this, we wrote that while these tranches of notes remained marked down, Farmers’ issuance of the up to $2.15 billion wildfire loss saw the notes recover slightly to bids of 50 at the then latest pricing.
Last week, we reported further price recovery for the Class A tranche of notes, with sources confirming that on some pricing sheets, the notes were being marked for bids as high as 90 cents, suggesting minimal, or no losses at all will be suffered.
With the notes already having recovered a lot, and in light of the new $600 million loss estimate, sources have suggested that these cat bond notes are now looking safer than before, although given this is still likely a preliminary estimate, it’s hard to say with certainty whether or not they are entirely safe.
“The Exchanges’ focused approach to overseeing their coverage portfolio in the state, a strong capital base, and a comprehensive reinsurance program have positioned the Exchanges to effectively manage this event.
“With deep roots in Southern California, the Farmers Exchanges remain dedicated to supporting the recovery process for all their customers, employees and communities impacted by the devastating fires. The Exchanges also want to reaffirm their previously announced commitment to expand coverage options in California,” said Farmers.
You can read all about the Topanga Re Ltd. (Series 2021-1) catastrophe bond and every other cat bond ever issued in the comprehensive Artemis Deal Directory.
English (US) ·