Lloyd’s of London expects $2.3bn losses from California wildfires

Lloyd’s of London expects losses of $2.3bn (£1.78bn) from the California wildfires that ravaged Los Angeles this year, but fine art losses were limited because rich residents took their prize possessions with them.

The Eaton and Palisades blazes in Los Angeles in early January killed 29 people and were only fully contained after 24 days, having burned more than 14,973 hectares (37,000 acres) and destroyed more than 16,000 buildings.

The world’s oldest insurance market reported a 10% drop in annual pre-tax profits, to £9.6bn, as part of a trading update, before the full results on 20 March.

While it will not be included in the 2024 results, Lloyd’s currently estimates the net loss to the market from the California wildfires to be about $2.3bn.

Burkhard Keese, the chief financial officer, said: “We would like to extend our deepest sympathies to those affected by the California fires earlier this year. Although we are still assessing the full impact, we do not expect this to be a capital event.”

A capital event is a large loss, for example from a big hurricane or earthquake, that causes widespread damage and triggers large insurance claims across many syndicates, which make up the Lloyd’s market.

The affluent Pacific Palisades area and surrounding neighbourhoods were the location of some beautiful 20th-century architecture; for example, houses by the émigré Austrian modernist Richard Neutra have been reduced to ashes.

While some experts had expected big losses in fine art, Lloyd’s said most of its exposure was reinsurance payouts on home insurance policies. Keese told the Financial Times that rich residents took their fine art with them “because even if you get the money, you can’t replace your Rembrandt”.

However, insurers around the world are facing billions of losses from the wildfires, with total losses across the industry estimated at up to $40bn, according to the data firm Milliman.

Keese said human-made and natural catastrophe losses were likely to keep the cost of commercial cover higher for longer, despite expectations that some prices would fall this year, after losses from US hurricanes dipped because of less severe storm seasons.

According to the National Ocean and Atmospheric Administration, the frequency of weather and climate disaster events affecting the US, with losses exceeding $1bn, has steadily increased each decade from three a year in the 1980s, to 27 in 2024. The annual cost has also increased, from $22bn a year on average in the 1980s to $182.7bn last year.

Lloyd’s combined ratio, which measures claims and expenses as a proportion of insurance premiums, rose to 86.9% in 2024 from 84% the year before, as insurers faced large claims from the US hurricanes Helene and Milton in the autumn and the collapse of a bridge in Baltimore a year ago. Gross written premiums increased by 6.5% to £55.5bn, boosted by property and reinsurance.