Despite significant losses from the California wildfires in January 2025, S&P Global Ratings considers it an earnings event and expects it to mostly affect US renewals rather than global markets, according to Taoufik Gharib, Director & Lead Analyst, Reinsurance Ratings.
Speaking during S&P’s Fourth Quarter U.S. Insurance Webinar, Gharib noted that the wildfire losses will influence pricing in the upcoming renewals.
“So we think those types of losses will affect pricing going forward for the upcoming renewals,” he said. “But we think, based on our conversation with some major players, that potentially will mostly affect US renewals, not the global renewals.”
He added, “I think the next one is the Japanese renewal. I think we’ve been hearing in the market that those rates could be under pressure, maybe up to 10% or so. But given the size of the losses in California, we believe that it will firm up rates, at least in the US going forward.”
Gharib also emphasised that, despite the wildfire’s size, S&P still views it as an earnings event since it occurred early in the year.
“Granted, it consumed up to 40% of the annual cat budgets. But it’s still an earnings event for the year,” he said.
Global reinsurer Swiss Re confirmed recently that its wildfire losses accounted for about 35% of its full-year 2025 natural catastrophe budget of €2 billion.
Gharib continued, “I think for the quarter, we may see some reinsurers producing losses from an underwriting perspective, just given that the California wildfire losses and other events would be booked in the first quarter, but still, for the year, we still believe companies would generate strong earnings.”
S&P echoed this sentiment in a report, stating that the impact will be manageable for global reinsurers, with losses largely remaining within their natural catastrophe budgets for first-quarter 2025.
However, S&P warned that the wildfires could significantly impact homeowners, with property insurers likely to raise rates and/or limit coverage options in the region.
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