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According to independent insurance-linked securities (ILS) investment manager Euler ILS Partners, the Los Angeles, California wildfires could have a significant impact on US pricing, especially if insurance industry losses were to exceed $30 billion.
As we’ve been reporting, official reports state that over 17,000 structures have been damaged or destroyed by the wildfires, and the first estimates of insurance industry losses from catastrophe risk modellers, so far have a mid-point of $31.125 billion.
The highest estimate so far comes from CoreLogic at $35 billion to $45 billion. More recently, Verisk pegged insured losses from the wildfires at between $28 billion and $35 billion, and Karen Clark & Company (KCC) recently said that the hit to the industry will sit close to $28 billion.
Additionally, Euler ILS Partners previously pegged insurance industry losses from the wildfires to sit between $15 billion and $17 billion, however, the firm noted that this depends on costs related to factors such as business interruption and additional living expenses.
In its renewal update report, Euler ILS Partners labelled the California wildfires as one of several key factors that are poised to influence pricing at the mid-year renewals later this year.
Euler ILS Partners explained that if insurance industry losses from the event were to exceed $30 billion, they believe that it could stabilise, or even increase reinsurance and retrocession rates for the remainder of 2025 in the US.
Along with the wildfires, the firm noted that the Florida reinsurance market continues to face pressure due to increased frequency of hurricane losses.
“However, substantial rate increases passed to policyholders are expected to maintain affordability for reinsurers during mid-year renewals,” the firm said.
Switching attention to Japan, analysts stated that a year of minimal loss activity is likely to result in flat or slightly reduced rates (up to -5%).
Meanwhile, the UK reinsurance market is expected to follow recent trends seen within European pricing, with reductions of up to -10%, while retention levels and contract terms are expected to remain steady, the firm added.
Reflecting on the January renewals, Euler ILS Partners said, “The renewal season unfolded smoothly, with sufficient capacity meeting market demand. While risk-adjusted pricing experienced slight reductions in certain segments, contract terms, and conditions remained stable.”
Adding: “Retentions (the portion of risk retained by the counterparty/cedent) were consistent with 2024 levels, though some loss-affected transactions in the US saw some increases. In the retro market (reinsurance for reinsurers), these was sustained demand for expanded coverage, especially for secondary perils such as wildfires and floods, while in the traditional reinsurance market the overall coverage (perils/regions included in the contract) remained largely unchanged.”
Concluding, Euler ILS Partners states that despite mixed pricing trends, the overall reinsurance environment remains supportive of generating strong risk-adjusted returns.
“Our focus will remain on maintaining underwriting discipline, diversifying across regions and risks, and leveraging our deep expertise and robust relationships in the traditional reinsurance,” the firm added.
English (US) ·