RenRe works off $50bn LA wildfire industry loss, Chubb also appears to pick a high figure

Initial loss estimate announcements for the Los Angeles, California wildfires from Bermudian reinsurance firm RenaissanceRe and global re/insurer Chubb may raise some concerns, as RenRe based its estimate on a $50 billion industry loss event, while Chubb also seems to be working from a relatively high industry figure.

Industry loss estimates from catastrophe risk modellers for the LA region of California wildfires so far have a mid-point average of $31.125 billion.

The range, across now the four leading catastrophe risk modelling firms, spans from $20 billion to as high as $45 billion.

But, in announcing its Q4 and full-year 2024 results yesterday, Bermudian reinsurer RenaissanceRe (RenRe) explained that it is working off a $50 billion industry loss estimate for the event.

Saying that the January 2025 California wildfires have so far “led to a range of publicly available industry insured loss estimates,” RenRe explained that it expects its pre-tax losses from the event to be roughly 1.5% of the California wildfires’ aggregate industry insured loss.

“Based on a $50 billion aggregate industry insured loss, the Company estimates a pre-tax net negative impact on net income (loss) available (attributable) to common shareholders of approximately $750 million in the first quarter of 2025,” RenRe reported.

This may just be conservatism showing through, with RenRe working off a higher estimate for the event to ensure its shareholders are kept aware of the high-end possible impact to the reinsurer’s finances.

But RenRe also explained that, “It is difficult at this time to provide an accurate estimate of the financial impact of the California wildfires, including as a result of the preliminary nature of the information provided thus far by industry participants, the magnitude and recency of the California wildfires, and other factors.”

RenRe has based its initial estimate on, “initial industry insured loss estimates, market share analysis, the application of modeling techniques, a review of in-force contracts and potential uncertainties relating to reinsurance recoveries,” the reinsurer said.

The estimate from RenRe, of around $750 million pre-tax impact, is higher than any figure we’ve seen from industry analysts for the company and as high as analyst estimates for some of the big four reinsurers.

As RenRe reports its estimate as net negative impact, we assume this is after having accounted for any share of losses taken by the noncontrolling interests (investors) in its third-party capitalised reinsurance joint ventures and ILS funds, although cannot be certain at this time.

Meanwhile, global re/insurer Chubb also gave a preliminary estimate for its losses from the wildfires yesterday, when reporting its latest set of results.

Chubb CEO Evan Greenberg said, “The California wildfire disaster is a terrible tragedy that is still unfolding. Our colleagues have been on the ground from the beginning, endeavoring to assist our policyholders who have lost property, been displaced from their homes and businesses, and had their lives severely disrupted. While it doesn’t erase the enormous difficulty they have and will continue to experience, we are doing all we can, in small and big ways, to ease their burden. Our thoughts are with those who have suffered, and our gratitude goes to those firefighters and emergency workers who have served tirelessly.

“From a financial perspective, our current estimate of the cost of supporting our customers and helping them recover and rebuild from this catastrophe is $1.5 billion net pre-tax and is a first quarter 2025 event.”

Equity analysts had been projecting Chubb could have a meaningful loss from the wildfires, but the figure announced is more meaningful than any we’ve seen in those reports.

In fact, analysts at KBW said that even at a $40 billion industry loss event, the California wildfires would be estimated to cause a $1.424 billion gross impact to Chubb.

Chubb’s reinsurance retention is said to be at $1.75 billion, so it may not see its excess-of-loss catastrophe cover attach. But we suspect Chubb may also have some quota share coverage in-force and of course may also share some losses with its third-party capitalised joint-venture ABR Re.

So, it seems that re/insurers may work from higher-end and above industry loss estimates for these wildfires, to account for any uncertainty and also the lack of clarity over cedent losses and claims volumes so far.

But, figures like $50 billion may raise concern for some, as at these higher-levels of industry loss the proportion taken by reinsurance and retrocession capital will be more considerable, as the proportion of loss that flows along the capital chain rises alongside the overall quantum.

Read all of our coverage related to the Los Angeles, California wildfires here.