Euler ILS Partners, the specialist insurance-linked securities (ILS) investment manager, has issued an event report for the California wildfires, saying the company believes the insurance industry loss may be between $15 billion and $17 billion, but highlighting this depends on costs related to factors such as business interruption and additional living expenses.At this level of insurance and reinsurance market loss, Euler ILS Partners noted that, for its portfolios, “At this point we believe there will be no notional loss of any investments due to the wildfires.” But added that, “However, it is important to mention that the catastrophic conditions are ongoing.” “The current fires in California have been among the most devastating in recent history, marked by widespread property destruction and fatalities.The combination of prolonged drought, heatwaves, and very high winds created ideal conditions for the rapid spread of multiple wildfires across the region,” Euler ILS Partners reported.Saying that, “Preliminary estimates suggest total economic losses exceeding USD 50 billion, with insured losses anticipated to be between USD 15 billion to USD 17 billion.” However, the ILS investment manager also noted that the quantum of losses very much depends on, “claims related to property damage and business interruption and additional living expenses.” Analysts and brokers are beginning to highlight the potentially significant additions to industry losses from factors such as these.

Claims related to business interruption may be significant, given the wide-spread and impactful nature of the wildfire devastation in California.With thousands of people losing their homes and businesses, this also raises the prospects of meaningful additional living expense claims, which pay for temporary rehousing and other factors associated to the tragic loss of homes people have suffered.As well as this, fine art specialists have called this potentially one of the larger loss events for that insurance segment, given high-value properties (such as seen in some of the regions of California affected) can tend to have valuable art and collections within them.

That could aggregate to another meaningful addition to the insurance market loss.Motor losses are another factor, although less relevant to the ILS market given its largely property focus.However there are some ILS contracts and even catastrophe bonds that do include some coverage for auto insurance books, although this is typically a smaller component of expected losses than property risks for these deals.

But, as highlighted by Euler ILS Partners, these additional claim vectors can have a bearing on the overall industry impact, which will be something to watch out for as more detail emerges and the damage assessments continue.Euler ILS Partners also noted that, in ILS market terms, “Over the recent years the wildfire exposure has been reduced significantly as the risk was identified to be significantly exposed to climate change and limited margin potential.” – .– .

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