Listed London carriers keep LA wildfire estimates unchanged but potential subrogation benefits to come

By Scott Vincent

May 2 - (The Insurer) - All three London-listed carriers reported no changes to previously disclosed Los Angeles wildfire estimates in this week’s first-quarter trading updates.

But these estimates do not reflect any potential subrogation benefits, according to management disclosures on the carriers' investor calls.

Hiscox CFO Paul Cooper said the group’s previously disclosed $170 million estimate remains prudent. The estimate comprises $150 million booked through Hiscox Re & ILS with the remaining $20 million split equally between its London market and retail segments.

“We haven't disclosed the breakdown in terms of Eaton versus Palisades. There is a strong likelihood, as we've noted, around the potential for subrogation in the Eaton loss,” Cooper said, adding that the vendor models assume a subrogation level of around 20%.

Lancashire chief underwriting officer Paul Gregory said the group had maintained its best estimate range of $145 million to $165 million for the LA wildfires, but noted there was potential for subrogation impacts to flow through.

“Underlying clients could see benefits of that in the future, that would then bring their losses down, and flow through to bring reinsurance and retro losses down,” he said on the group’s earnings call on Thursday.

“In our number we have not included any benefit of subrogation in the future, as it is unknown. Historically, our initial catastrophe reserves have been incredibly robust,” he said.

Beazley CEO Adrian Cox said the market had largely absorbed the California wildfires without much reaction.

“Despite the competitive environment, rates remain attractive, and there are good prospects for continued growth. Increased flow into the E&S market in the U.S. persists, and although prices have come down a little, reinsurance terms and conditions are mostly stable. Most importantly, reinsurance attachment points have not slackened, and we think this will help maintain discipline,” he said.

Cox said the renewal experience for those affected by the wildfires will likely be distinct from the competitive renewals at April 1.

“As we think about those who will be buying reinsurance between now and July 1, a lot of those were impacted by last year's catastrophe activity, and indeed the wildfires in January,” he said.

“The outlook for those renewals is distinct from what happened at 1.4. Certainly from what we're seeing so far, reinsurers appear to be adopting a slightly different strategy for that. So we're hopeful that the reinsurance market will be a little stronger, but we will wait and see, and we'll react accordingly.”