Insurance stocks sell off sharply as potential losses from Los Angeles wildfires rise

In this aerial view taken from a helicopter, the Kenneth Fire (below) approaches homes while the backside of the Palisade Fire (above) continues to burn in Los Angeles County, California, on January 9, 2025.

Josh Adelson | AFP | Getty Images

Insurance companies participating in California’s homeowners market sold off sharply on Friday as damage from the Los Angeles wildfires spread.

shares Allstate and Chubb Both fell 4% in early trading, while American International Group and traveler Each fell about 2%. The four stocks were among the biggest decliners on the S&P 500 on Friday morning.

AllState, Chubb and Travelers are the carriers most vulnerable to insurance losses in wildfires, JPMorgan said. The Wall Street firm noted that Chubb’s exposure could be particularly high because of its focus on high-net-worth clients in the region.

Insurance company shares fell on Friday

This week’s devastating fires could become the costliest in California history. JPMorgan Chase & Co. estimated Thursday that insured losses from this week’s fires could exceed $20 billion and could be even higher if the fires spread. These losses would far exceed the $12.5 billion in insured losses. 2018 campfireIt was the costliest fire in U.S. history, according to Aon Group.

Moody’s Ratings expects insured losses to be in the billions of dollars, given the high value of homes and businesses in the affected areas.

The Palisades Fire is the largest of the five fires. It has burned more than 17,000 acres, destroyed Over 1,000 structuresaccording to California authorities. Pacific Palisades is an affluent area with a median home price of more than $3 million, according to JPMorgan Chase.

Insurers have asked Southern California Edison to preserve evidence related to the devastating wildfires that devastated Los Angeles, according to an insurance company. The company files with the supervisory authority.

Certain reinsurers were also affected. Gongfeng Capital Group and Renaissance Reinsurance Holdings Co., Ltd. They fell 2% and 1.5% respectively on Friday. JPMorgan Chase believes that the rise in loss estimates increases the likelihood that insurers will violate reinsurance riders.