The devastating California wildfires in January led to substantial losses, and the global insurance market, particularly Bermuda’s insurers and reinsurers, is playing a pivotal role in the recovery.
These financial institutions in Bermuda anticipate shouldering nearly $10 billion in gross claim losses, providing critical payments to policyholders and other insurers in the United States to help them navigate the immense damage caused by the blazes.
This significant financial commitment underscores Bermuda’s long-standing dedication to offering vital protection and peace of mind to American families, businesses, and communities in the face of catastrophic events.
Insights gathered from a comprehensive US Data Claims Survey conducted by the Bermuda Monetary Authority (BMA) in March, which included responses from 119 reinsurers, shed light on the immense scale of the disaster.
While the overall economic losses stemming from the wildfires are estimated to be staggering, ranging between $250 billion and $275 billion, the insured losses are projected to be at least $30 billion.
Notably, Bermuda-based firms are expected to cover a substantial portion of these insured losses, potentially up to 30 percent, demonstrating their significant contribution to the recovery efforts.
This financial capacity is a testament to Bermuda’s position as a robust hub for risk capital, capable of absorbing and managing large-scale claims.
The California wildfires, exacerbated by hurricane-force winds and persistent drought conditions, stand as one of the most financially impactful wildfire incidents in American history. Beyond the destruction of vast expanses of land and catastrophic property damage, these fires tragically resulted in loss of life.
The BMA’s loss estimations comprehensively cover a wide array of damages, including direct property destruction, costs associated with evacuations, interruptions to business operations, and additional living expenses for affected individuals across residential, commercial, and industrial sectors.
Furthermore, the estimates meticulously factor in the extensive costs of post-wildfire reconstruction, encompassing clean-up operations, necessary permit fees, expenses related to building code improvements, and potential legal or ordinance-related expenditures.
Craig Swan, CEO of the Bermuda Monetary Authority, highlighted the indispensable role Bermuda plays in providing essential risk capacity not only to the United States but also to other regions susceptible to natural disasters. He emphasized that the ability of US insurers to transfer a portion of their risk to Bermuda allows for global risk diversification, which, in turn, contributes to stabilizing insurance costs for consumers residing in high-risk zones.
However, Mr. Swan also pointed out a persistent societal concern: the considerable disparity between total economic losses and the portion that is insured. This “protection gap” underscores an urgent need for enhanced public-private partnerships and increased collaboration among regulators, insurers, and other relevant stakeholders to effectively address this critical issue.
Bermuda’s commitment to supporting US policyholders during catastrophes is well-established, with a proven history of paying significant portions of insured losses from some of the costliest weather events in recent memory.
For instance, Bermuda-based firms are estimated to have covered up to $31 billion, or 30 percent, of the industry’s insured losses from Hurricanes Harvey, Irma, and Maria in 2017. Similarly, they bore approximately $13 billion (25 percent) of Hurricane Ian’s costs in 2022 and $2 billion (20 percent) from Hurricane Helene last year. Gerald Gakundi, the BMA’s Deputy Managing Director of Supervision (Insurance), further underscored that despite the numerous obstacles, the challenging task of rebuilding after such widespread destruction continues. He affirmed that the swift response of Bermuda’s insurers and reinsurers in settling claims during these difficult times is fundamental to facilitating the essential rebuilding efforts that follow such devastating events.