Lloyd’s of London expects to absorb $2.3bn (£1.78bn) in losses from the devastating California wildfires that struck Los Angeles earlier this year. However, fine art losses remained limited, as wealthy residents evacuated their valuable collections.
The Eaton and Palisades wildfires in January claimed 29 lives and burned for 24 days before being fully contained. The fires scorched over 37,000 acres and destroyed more than 16,000 buildings, leaving a trail of destruction across affluent neighborhoods.
Despite these massive losses, Lloyd’s chief financial officer, Burkhard Keese, assured that the event would not impact the company’s capital levels. “Although we are still assessing the full impact, we do not expect this to be a capital event,” Keese stated.
Lloyd’s reported a 10% decline in annual pre-tax profits, dropping to £9.6bn, in its latest trading update. While the California wildfires will not appear in the 2024 results, they are expected to affect profits in 2025.
Some experts had anticipated significant losses in fine art insurance, given the fires’ impact on luxury properties, including iconic 20th-century homes designed by architect Richard Neutra. However, Lloyd’s revealed that most losses were tied to home insurance reinsurance payouts. Keese noted that wealthy residents protected their art by evacuating it, saying, “Even if you get the money, you can’t replace your Rembrandt.”
The global insurance industry is bracing for billions in wildfire-related claims, with total losses estimated at up to $40bn, according to the data firm Milliman. Rising natural and human-made catastrophe losses are expected to keep commercial insurance costs high, despite some expectations of price reductions this year.
The frequency of billion-dollar weather disasters in the U.S. has surged over the decades. According to the National Oceanic and Atmospheric Administration, these events have increased from an average of three per year in the 1980s to 27 in 2024. The financial impact has grown as well, with annual costs soaring from $22bn in the 1980s to $182.7bn last year.
Lloyd’s combined ratio—a key measure of insurance profitability—rose to 86.9% in 2024, up from 84% the previous year. The increase reflects large claims from the US hurricanes Helene and Milton, as well as the collapse of a Baltimore bridge. However, gross written premiums climbed by 6.5% to £55.5bn, driven by property insurance and reinsurance growth.
As climate disasters continue to escalate, insurers are navigating an increasingly volatile market.
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