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Allstate said this week that it expects to lose $1.1 billion due to the Los Angeles fires, making it the second major insurer to announce the financial impact of the country's single most costly blaze.
The Northbrook, Ill., company said the figure represents its losses on a pretax basis and after deducting payments it received from reinsurance. The company provided the estimate in announcing its fourth-quarter earnings, which saw net income grow 30% to $1.9 billion.
Allstate said its estimated losses from the fires were minimized by its "comprehensive reinsurance program" and its decision starting in 2007 to reduce its market share. Allstate had a 5.8% share of the state's homeowners market in 2023, making it the sixth-largest carrier. Insurers acquire reinsurance typically from other larger insurers in order to limit their payouts during huge wildfires and other catastrophic events.
The company also received approval last year for an average 34% rate increase starting in November.
Read more: State Farm seeks emergency rate increase averaging 22% after L.A. fires
Last week, another larger insurer, Chubb Ltd., estimated that its losses from the fire will total about $1.5 billion, with the financial impact expected to be limited to the first quarter.
The American-Swiss insurer had only a 2.27% share of the California homeowners market in 2023, putting it outside the state's 10 largest home insurers. However, it focuses on providing coverage for more expensive homes such as those predominant in Pacific Palisades, which was devastated by fire and has a median home value of $3.5 million, according to Zillow.
State Farm General, California’s largest home insurer, has not released its losses but asked state officials Monday for an emergency rate hike averaging 22%, saying the fires have put the company in dire financial straits.
The insurer, a subsidiary of State Farm Mutual Automobile Insurance Co. of Bloomington, Ill., said the company has already received at least 8,700 claims and paid more than $1 billion to customers. It also expects to pay out “significantly more" to satisfy claims.
The insurer said the rate hike is necessary to rebuild the company’s capital base so it will not have to “further constrain” its ability to provide home insurance in the state. Industry ratings agencies have said they expect such insurance premium increases because of the fires.
All told, risk modelers have estimated it will cost the insurance industry $20 billion to $45 billion to pay for property damage, temporary housing costs and other claims stemming from the fires. That would make the blazes one of the country's worst natural disasters but probably not as costly as Hurricane Katrina.