California E&S Insurance

I’m a reinsurance underwriter and we are still trying to figure out what we were even on in this fire. It’ll be a while before the impact is truly known. 2023 and 2024 were the peak of the hard market cycle, and we had been anticipating significant rate reductions this year as profitability improved. That might not be the case anymore. The real test is going to be seeing if these insurance companies acted quickly enough to address their wildfire aggregations. There was a huge push after the 2017/2018 wildfires for insurers to clean up their books by doing things like non-renewing the highest wildfire risks, drastically increase premiums in wildfire prone areas, tweak their contracts to limit their liabilities after losses and start enforcing risk management requirements like creating defensible space, replacing wood shingle roofs etc. I was previously a wildfire underwriting specialist in CA and my company pulled out of the state entirely because we just didn’t see a way to charge enough money to offset the risk. The prices we needed were more than the market could bear. Many of these homes in pacific palisades had no insurance coverage at all because they either had no markets available or they were looking at an E&S policy with premium increases of 10x and 50% wildfire deductibles. Unfortunately as with most natural disasters, the wealthy people will be fine and the regular people will be left trying to get whatever relief they can from FEMA and charities. Many of the most valuable homes that burnt down were bought decades ago and are fully paid off. Almost all of the value is in the land itself. The owners will take a cash settlement for whatever insurance they might have had and then they’ll sell the empty lot and still end up with a profit.

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