By Manya Saini
(Reuters) -U.S. property and casualty insurance stocks slid in premarket trading on Friday on worries over the billions of dollars in potential catastrophe-related claims from the wildfires menacing Los Angeles, California.
The Palisades Fire between Santa Monica and Malibu on the city’s western flank and the Eaton (NYSE:ETN) Fire in the east near Pasadena already rank as the most destructive in Los Angeles history, consuming more than 34,000 acres (13,750 hectares) – or some 53 square miles – and nearly 10,000 structures, turning entire neighborhoods to ash.
J.P.Morgan doubled its forecast of insured losses to over $20 billion.
“We expect insured losses to run well into the billions of dollars, given the high value of homes and businesses in the affected areas, and to cause large losses for P&C insurers with significant homeowners and commercial property market share in Los Angeles,” Moody’s (NYSE:MCO) Ratings said in a note.
“It will take weeks or months to determine the magnitude of the insured damages, but the Los Angeles wildfires are likely among the most costly wildfires in the state’s history,” it added.
Raymond (NS:RYMD) James sees insured losses in the range of $11 billion to $17.5 billion and said the disaster could become the costliest wildfire in United States history. Analysts at Morningstar DBRS pegged insured losses in excess of $8 billion, based on preliminary estimates.
Sector bellwether Travelers (NYSE:TRV) fell 4% before the bell. Mercury General (NYSE:MCY) slumped 32%, while Allstate (NYSE:ALL), Chubb (NYSE:CB) and AIG (NYSE:AIG) dropped between 4.5% and 6%.
European insurers also traded lower with Beazley, Lancashire and Hiscox (LON:HSX) fell between 2% and 4% and were among the biggest losers across UK-listed large and midcaps..
The Pacific Palisades area is one of the most expensive neighborhoods in the U.S., home to Hollywood A-Listers and multimillion dollar mansions. Ahead of this week’s disaster, its insurance costs were among the most affordable in the country, according to a Reuters analysis.
But that is likely to change after the scale of losses anticipated in the wildfires now ringing Los Angeles, as well as regulatory changes enacted late last year, four analysts told Reuters earlier this week.
“While leading U.S. property insurers are in good financial condition, the California property insurance market has been challenging… leading many insurers to re-think their product offering, including an outright exit from the market,” Morningstar DBRS wrote in a client note.