LA Wildfire Sparks Fallout for Domestic Insurers... Hundreds of Billions in Losses Inevitable

DB Insurance Estimates Losses Exceeding 60 Billion Won
Korean Re Expects Losses of Around 20 Billion Won

Domestic insurance companies operating locally are expected to suffer hundreds of billions of won in damages due to a large wildfire in the western United States, specifically in the Los Angeles (LA) area.

According to the insurance industry on the 15th, the Korean insurance companies operating in the U.S. are Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and the reinsurer Korean Re. They sell homeowners insurance and commercial property insurance to Americans. The LA wildfire began on the morning of the 7th with smoke first appearing on the Temescal ridge of the Santa Monica Mountains in the Palisades area and the flames have yet to be contained.

A residential area damaged by a large wildfire in the western United States, Los Angeles (LA) region. Photo by Getty Images Yonhap News.

DB Insurance estimates losses from this fire to be between 60 billion and 100 billion won. DB Insurance holds 37 contracts in seven areas of LA affected by the wildfire. These include 34 homeowners insurance policies in the Eaton area and 3 small business comprehensive insurance policies in the Palisades area.

Im Heeyeon, a researcher at Shinhan Investment Corp., stated in a report on the same day, "After reinsurance cessions, the retained amount is $40 million (approximately 60 billion won), so the insurance loss from this incident will be limited to 60 billion won," adding, "There is a possibility of restoration premiums arising for excess of loss (XOL) reinsurance, but the amount will be small." Kim Doha, a researcher at Hanwha Investment & Securities, said in a report the previous day, "Considering past cases, DB Insurance is expected to incur losses in the 100 billion won range," but added, "However, since the disaster is not yet over, accurate predictions are difficult." DB Insurance suffered losses of about 160 billion won during the 2023 Hawaii wildfires. A DB Insurance official said, "The Hawaii fire caused large losses partly because many buildings were wooden," and added, "We will accurately assess the scale of damage in the LA local incident area and promptly pay insurance claims to cooperate as much as possible with local residents, including Koreans, in recovering from the damage."

Korean Re estimates the loss from the LA wildfire to be between $10 million and $19 million (approximately 14.6 billion to 27.8 billion won). The most likely scenario at present is expected to be a loss of about $12 million (17.5 billion won). A Korean Re official stated, "We have maintained a conservative underwriting policy considering the usual natural disaster risks in the area."

Hyundai Marine & Fire Insurance has four policies in the vicinity of LA. However, since these are located far from the wildfire area, no damage claims have been reported so far. Samsung Fire & Marine Insurance has also not received any damage claims yet but is closely monitoring the local situation.

Meanwhile, U.S. weather information company Accuweather estimates the damage cost from this fire to be up to $275 billion (approximately 402.2 trillion won). Global investment banks (IBs) predict that the insurance industry losses could reach about $40 billion (58 trillion won).