Farmers says net loss from LA wildfires estimated at $600 million

By David Bull

Feb 19 - (The Insurer) - The Farmers Exchanges has initially estimated a loss of $600 million from the Los Angeles wildfires, net of its per-occurrence reinsurance program and gross of tax and around $250mn of reinstatement premium.

The Farmers Exchanges include Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange.

The estimate excludes the Farmers share of Fair Plan losses from the wildfires.

In a statement issued on Thursday morning, Farmers said: “The exchanges’ focused approach to overseeing their coverage portfolio in the state, a strong capital base, and a comprehensive reinsurance program have positioned the Exchanges to effectively manage this event.

“With deep roots in southern California, the Farmers Exchanges remain dedicated to supporting the recovery process for all their customers, employees and communities impacted by the devastating fires. The exchanges also want to reaffirm their previously announced commitment to expand coverage options in California.”

The net loss estimate comes after Farmers reportedly released an initial gross loss estimate of $1.6 billion to $2.15 billion last month.

Details of Farmers' in-force reinsurance protections have not been confirmed.

According to its most recently filed 2023 annual report, it had an excess-of-loss cat program that had different limits depending on the state, as well as an aggregate element.

It also had in place an all-lines quota share agreement with its Farmers Re vehicle and third-party reinsurers which was set at 33 percent that year.

Reinsurers on the 2023 all-lines quota share agreement were Swiss Re (8 percent), Hannover Re (10 percent), Farmers Re (10 percent), New Re (4.5 percent) and Scor (0.5 percent).

Farmers Re retrocedes a portion of the risk it assumes from the exchanges to Zurich Global via a quota share.