LA Fires Caused 60% of Global Insurance Losses in First Quarter

Los Angeles Mayor Bass announced a $1 billion deficit, major employee layoffs, begging for a state bailout, and City Controller warned of a potential bankruptcy due to increases in the estimated losses from January wildfires.

The continuing crisis received more bad news from Gallagher Reinsurance that just estimated that the Los Angeles Palisades and Eaton fires combined losses of $65 billion equaled 60% of the $110 billion in total worldwide property loss in the first quarter ending in March.

The Mountain Top Times reported last month that 103-year-old State Farm insurance that had already paid out $1.75 billion on the 9,500 claims filed from the LA wildfires, was informed last month by the California Insurance Commission that as the largest insurer in the state, it would also be liable for another $1 billion assessment loss for the state-run Fair Plan insurer.

Standard & Poors CreditWatch downgraded State Farm’s ability to pay claims by ominously warning:

“We remain deeply worried about State Farm General’s financial position, as pricing risks accurately in California remains challenging. As outlined in our emergency interim rate filing on February 3, immediate rate increases are essential to stabilizing State Farm General’s finances and preventing a potential rating downgrade. S&P’s ‘CreditWatch – Negative’ designation today underscores the urgency of this need.”

Gallagher Re’s updated estimate of $40 billion of insured losses from the represents the fourth spectacular increase since the January insured firelosses that originally was estimated at $8.6 billion.

Gallagher Re commented that first quarter losses tend to be the lowest for the year, but the combined Palisades and Eaton fire losses alone were twice the insured first quarter average global losses of $20 billion over the last decade. The only other major losses for the period were $6.6 billion from multiple Mid-West tornados, and hundreds of millions for Ireland windstorms, China’s Tainan earthquake, and Australia’s Cyclone Alfred.

Los Angeles Mayor Karen Bass after the wildfires in early February tried to minimize the impact fromslashing the LA Fire Department’s budget by $17.6 million this year that had caused almost a third of LA fire engines to be down for maintenance issues when the wildfires storms hit in January.

LA City Controller Kenneth Mejia complained that the city ignored repeated warnings from the fire chief over what the cuts could bring, because it wasn’t on Mayor Bass’ agenda.

Controller Mejia In a series of January posts on Xcalled it “disgraceful” that Bass and other city officials were continuing to downplay the budget cuts.

Controller Mejia insightfully warned the public that LA firestorm losses were understated, and that there was a huge risk of the city going bankrupt

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