The rampant wildfires in Los Angeles could cost notable insurance firms based out of the European Union more than $1.0 billion in 2025, according to a Berenberg analyst.
LA fires have so far displaced millions of people while 24 have reportedly lost their lives as well.
Insured losses related to the wildfire are now estimated to be around $20 billion – roughly double the initial estimate by JPMorgan.
LA wildfires to hit European insurance firms
Michael Huttner expects at least seven European reinsurance giants to pay up to a billion euros ($1.02 billion) for losses related to the LA wildfires this year.
His estimate excludes the London-listed reinsurance firms.
“If I think of the European insurers, and that excludes the London market … you’d probably be looking at about a billion [euros in loss],” he said in an interview with CNBC today.
Huttner’s forecast is significant as TipRanks rates him the best Wall Street analyst among a total of 9,300.
What LA fires mean for EU insurance firms’ earnings
The Berenberg analyst does not, however, expect the estimated payouts to weigh on the European insurance companies’ earnings in 2025.
That’s because each of them will only bear a small portion of the total economic loss from the disaster.
Munich Re, for example, will bear the largest net loss of about €220 million versus as much as €2.8 billion it has already set side for potential losses.
The insurer continues to expect over €6.0 billion in profit for 2025.
Other European insurance firms that are expected to see hundreds of millions in payouts this year due to the LA fires include Swiss Re, Hannover Re, Allianz, and Zurich Insurance Group.
Nonetheless, it’s only the start of the year at writing.
So, the insurers may eventually lower their expectations for full-year profit depending on the frequency and extent of natural disasters through the rest of 2025.
Japanese insurance firms will soak up losses as well
European insurance companies are unlikely to be the only ones to take a hit due to the wildfires in Los Angeles, according to JPMorgan.
Its analysts expect Japanese firms like SOMPO and Tokio Marine to bear up to $63 million worth of losses related to the natural disaster.
Investors should know, however, that the cost of LA fires this year is estimated to be far lower than in the past.
In 2018, for example, the California wildfires resulted in a $16 billion hit to the insurance industry.
Of that, more than $500 million was absorbed by Munch Re alone.
The decline in losses to insurers may be related partly to the California FAIR Plan – an insurance programme that combines contributions from all licensed insurers in California into a single pooled fund that absorbs the majority of losses.
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