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While gross insured losses from this year’s California wildfires have been “significant,” much of the loss is expected to be ceded to global reinsurance markets, thus reducing the net exposure of the U.S. domestic primary market, Fitch Ratings Inc. said Wednesday.
In a report issued earlier this month, Chicago-based Fitch upgraded its outlook for the U.S. property/casualty insurance sector to “stable” from “negative” and projected a 2018 combined ratio of 99% despite losses from Hurricane Michael and California wildfires.
Fitch noted that the California Department of Insurance had received nearly 40,000 claims related to the Camp and Woolsey/Hill fires, with a total of over $9.1 billion of incurred losses reported as of Dec. 12. It said about 92% of the claims relate to residential property policies.
Fitch noted that the most recent loss estimates for the November fires from catastrophe loss modelers AIR Worldwide and Risk Management Solutions Inc. place insured losses in a range of approximately $9 billion to $13 billion, with Corelogic Inc. estimating even higher losses at $15 billion to $19 billion.
Fitch said it “estimates that losses will likely reach the higher end of these estimates, based on individual public announcements that several companies have released.”
“The timing of the losses in the fourth quarter is expected to impact ongoing Jan. 1 reinsurance renewal discussions for primary companies that transferred fire losses to their risk transfer partners,” said Fitch, noting that for some companies, 2018 represents the second year in a row that wildfire losses have hit reinsurance layers. “When combined with the substantial third quarter catastrophe hits, the above average industry catastrophe losses in back to back years may provide momentum for rate increases and improved terms and conditions for reinsurers in 2019,” said Fitch.
Insured losses for the Camp and Woolsey wildfires in California will be between $9 billion and $13 billion, catastrophe modeler Risk Management Solutions Inc. said Monday.