Lancashire Holdings Hit With $165 Million Dollar Los Angeles Wildfire Bill

British insurer Lancashire Holdings has disclosed potential losses ranging between $145 million and $165 million from the devastating Los Angeles wildfires that ravaged the region last month. The Lloyd’s of London participant revealed these preliminary estimates to the market on Thursday, causing its shares to decline 4.8 per cent to 599p.

The catastrophic event, which claimed 29 lives and wreaked havoc across affluent neighbourhoods including Pacific Palisades, has sent shockwaves through the insurance sector. Major US insurers have already reported significant exposure, with Travelers anticipating pre-tax losses of $1.7 billion and Allstate projecting $1.1 billion in claims.

Despite the substantial impact, Lancashire Holdings maintains a robust outlook. The Bermuda-based speciality insurer emphasised its strong capitalisation and highlighted the effectiveness of its aggregate reinsurance cover, which is designed to protect against multiple large catastrophic events.

Chief Executive Alex Maloney addressed the situation, emphasising the crucial role of insurance in supporting recovery efforts. “Our thoughts are with all those affected by the recent wildfires which wrought such devastation in California,” he stated, underlining the industry’s vital function in both risk protection and rehabilitation.

The fires, exacerbated by severe drought conditions and unprecedented Santa Ana winds, represent a growing trend of climate-related insurance claims. Scientists from Imperial College London have established a direct link between climate change and the increased likelihood of such catastrophic events.

Lancashire Holdings, valued at approximately £1.5 billion and reporting pre-tax profits of $332.7 million in 2023, is scheduled to release its annual results on 6 March. The company’s diverse portfolio, encompassing commercial shipping, oil refineries, property, and satellite insurance, positions it to weather this significant but manageable setback.