An aerial view of the aftermath of the devastating Los Angeles wildfires revealed a landscape of charred homes in the Pacific Palisades neighborhood, captured on January 9, 2025. The destruction has had a significant impact on the California homeowners’ insurance market, leading to a sharp drop in shares on Friday.
Companies such as Allstate, Chubb, and Travelers, which have a significant presence in this market, saw a marked decrease in their stock prices. Allstate’s shares took a 6% hit, while Chubb and Travelers both experienced a decline of over 3%. These companies were among the most significantly impacted on the S&P 500 on Friday. Other insurance companies, including AIG and Progressive, also saw their shares dip by more than 1%.
According to a report by JPMorgan, these companies are the most at risk from insured losses resulting from the wildfires. Chubb, in particular, may be heavily affected due to its concentration of high-net-worth clients in the area.
The wildfires this week have the potential to be the most expensive in California’s history. According to JPMorgan’s Thursday estimate, insured losses could exceed $20 billion. This figure could rise further if the fires spread, surpassing the $12.5 billion in insured damages from the 2018 Camp Fire, previously the most costly in US history.
Moody’s Ratings has predicted insured losses to be in the billions, given the high value of the homes and businesses in the areas affected by the fires.
The Palisades Fire, the largest of the five wildfires, has already destroyed over 17,000 acres and more than 1,000 structures, as reported by California authorities. The Pacific Palisades area, known for its affluent residents and high property values, has a median home price of over $3 million.
Insurance companies have requested Southern California Edison to retain evidence related to the wildfires, as per a company filing to regulators. Reinsurers such as Arch Capital Group and RenaissanceRe Holdings were also impacted, with their shares declining by 2% and 1.5% respectively on Friday. JPMorgan suggests that the increasing loss estimates could lead to breaches of reinsurance attachments at various insurers.
