- Global insurance industry losses could top £30bn after environmental chaos
The devastation caused by last month’s California wildfires will cost London-listed insurer Lancashire Holdings as much as £132million in payouts.
January’s wildfires killed at least 29 people and more than 200,000 were evacuated, as 18,000 homes and structures were destroyed, and over 57,000 acres of land were burned.
The global insurance industry is reeling from the impact, which is expected to cost firms as much as $31billion in total – making it the costliest disaster in California’s history.
Reinsurance group Lancashire’s products cover property and casualty, aviation, energy and marine, and ‘specialty’.
The Bermuda-headquartered firm, which has a market capitalisation of just over £1.5billion, estimates that ‘aggregate net ultimate losses’ related to the wildfires will be in the range of $145million to $165million.
Boss Alex Maloney said: ‘Our thoughts are with all those affected by the recent wildfires which wrought such devastation in California.
‘Events like this show the value of (re)insurance products in both offering protection and in supporting people as they rebuild their lives.’
The group assured investors it remains ‘extremely well capitalised to achieve its strategic ambitions’, while it has adequate aggregate reinsurance cover in place to ‘protect against the frequency of large catastrophe events’ and deliver ‘attractive return for shareholders in 2025’.
But the loss may vary from Lancashire’s preliminary estimates, with the insurer set to update investors further in its full-year results on 6 March.
Shares fall – but broker backs insurer
Lancashire Holdings shares were down 5.4 per cent to 595p in early trading, bringing 2025 losses so far to 9.4 per cent.
Analysts at Peel Hunt noted that Lancashire’s loss estimates would represent 50 basis points of $31billion in estimated insured industry losses, higher than the 29 bps the broker had assumed based on the 2017/18 California wildfires.
The broker is bullish on ‘attractively valued’ Lancashire, with a target share price of 690p.
Peel Hunt said: ‘The increased share is likely the result of growing the property catastrophe portfolio in a hard market in the past few years.
‘[However] the loss should not materially impact LRE’s capital allocation plans, which were moving to grow in non-catastrophe diversifying classes in 2025, bringing further balance to the portfolio.’
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