Fitch Ratings says the only good news found in California’s catastrophic wildfires for insurers and reinsurers is that no one gets downgraded. However, when you add California’s wildfires to hurricanes Harvey, Irma and Maria, 2017’s catastrophe losses are going to skyrocket.
Insured losses could hit $70 billion to $100 billion. Some insurers — says Fitch — could see losses so high that they strain capital.
In its report, Fitch compared what happened this year in California to other years and noted the losses expected will be $8 billion to $10 billion. “The expected loss from the October wildfires will eclipse past California wildfires by several fold. In comparison, the 1991 Oakland Hills wildfire reported a $2.7 billion loss (inflation adjusted through 2016) from 25 deaths and 2,900 structures destroyed. Last year’s wildfire in Fort McMurray was Canada’s largest wildfire, spreading across 1.15 million acres, destroying approximately 2,400 homes and buildings and generating $3.7 billion in insured losses,” the report said.
Personal lines will see the most losses.
“Fitch expects a large majority of the insured losses to be retained by primary insurers. The percentage of losses ceded to the reinsurance market will likely be considerably less than the portion ceded from recent hurricane events. Hurricane Irma also had a large flood loss component that increases the percentage of losses incurred by the National Flood Insurance Program and commercial insurers,” Fitch added.
Some insurers have noted their expected losses:
• Travelers — $525 million to $675 million
• AIG — $500 million
• Allstate — $516 million
California Insurance Commissioner is concerned about the quality of adjusters being sent into wildfire areas. He says they need to be properly trained on the California Unfair Practices Act, Fair Claims Settlement Practices Regulations and all laws relating to property and casualty insurance claims handling.
“Helping residents start the claims process in the face of so many losses and claims necessitated extraordinary actions. While getting claims settled is a priority, it must be done according to the laws in place to protect policyholders through a difficult process. I issued this notice to remind insurers that claims adjusters must be properly trained and process all claims according to California law,” Jones said.
He noted some fire victims have reported incorrect insurer responses to the California Department of Insurance. They include:
• Being given an incorrect timeframe to collect full replacement cost to rebuild. Policyholders have been told they have between 6 and 12 months. In a state of emergency, as these fires were, policyholders have no less than 24 months under California law.
• Being advised if they decide not to rebuild in the same location, the policyholder cannot receive full replacement benefits. Instead, California law provides policyholders may choose to rebuild in the same location, a new location or purchase an already built home in another location.
• Being told the additional living expense benefit expires in 12 months. Under California law, in a state of emergency, policyholders have up to 24 months.
Source link: Insurance Journal