(IMAGN) Jan 16, 2025; Altadena, CA, USA; The remains of St. Mark?s Episcopal church and school in Altadena, California. Mandatory Credit: Megan Smith-USA TODAY
CALIFORNIA – Lloyd’s of London anticipates losses of $2.3 billion from the California wildfires that devastated Los Angeles earlier this year. The Eaton and Palisades blazes, which burned over 37,000 acres and destroyed more than 16,000 buildings, resulted in 29 deaths.
Despite the widespread destruction, losses related to fine art were limited, as wealthy residents reportedly evacuated with their prized possessions. Lloyd’s reported a 10% drop in annual pre-tax profits, to £9.6 billion, in a trading update prior to their full results announcement on March 20th.
Burkhard Keese, Lloyd’s chief financial officer, expressed condolences to those affected by the fires and stated that the estimated $2.3 billion loss is not expected to be a “capital event,” meaning it won’t trigger widespread insurance claims across the Lloyd’s market.
The fires ravaged affluent areas like Pacific Palisades, destroying architecturally significant homes. While concerns about substantial fine art losses existed, Lloyd’s exposure primarily stemmed from reinsurance payouts on home insurance policies. Keese explained that wealthy residents took their valuable art with them, recognizing its irreplaceable nature.
However, the overall impact on insurers worldwide is significant, with industry-wide losses estimated at up to $40 billion, according to data firm Milliman.
Keese also indicated that both human-made and natural catastrophe losses are likely to maintain higher commercial insurance costs for an extended period. This prediction comes despite expectations of potential price decreases following a less severe US hurricane season.
The frequency of billion-dollar weather and climate disasters in the US has steadily increased, according to the National Oceanic and Atmospheric Administration, rising from an average of three per year in the 1980s to 27 in 2024. The annual cost of these disasters has also surged, from $22 billion to $182.7 billion.
Lloyd’s combined ratio, measuring claims and expenses against premiums, rose to 86.9% in 2024, up from 84% the previous year. This increase is attributed to significant claims from US hurricanes Helene and Milton, as well as the Baltimore bridge collapse. Gross written premiums increased by 6.5% to £55.5 billion, driven by growth in property and reinsurance.
