[jyl]

Travelers just made an interesting comment on the L.A. fires. While they aren’t saying anything about their expected loss yet, they did say that if 2Q or 3Q are “very active” for catastrophic loss, it is “possible” they could tap into their reinsurance layers for 2025. We know their (pre-fire) planned catastrophic loss, the historical seasonality of cat loss, and their reinsurance stack. So we can infer very roughly what loss they may be looking at for the fires. I’m guesstimating around $1BN and not over $2BN. Travelers has about 4% market share of the CA HO market I think. $1BN/0.04 = $25BN. Plus FAIR’s exposure, which while looking smaller than I originally thought, is still probably large. If the insurance industry does suffer a $25-35BN loss from the fires, the pressure to raise rates bigly will be huge. I mean, that could wipe out a decade of underwriting profit in the state. And they know the risks are rising. Insurance companies have the clearest, least biased view on climate risk you’ll find.