Chubb Faces $1.5 Billion Wildfire Claims as California Insurance Market Struggles
Chubb Ltd. is bracing for an estimated $1.5 billion in pretax costs due to the devastating wildfires in Los Angeles County. This makes it the first insurance company to reveal its financial hit from these disasters, which claimed over two dozen lives and caused widespread destruction. The Eaton and Palisades fires burned nearly 40,000 acres of homes, businesses, and landmarks, leaving families displaced and communities reeling.
Evan Greenberg, Chubb’s Chairman and CEO, expressed solidarity with the affected policyholders, stating, “Our colleagues have been on the ground from the beginning, endeavoring to assist our policyholders who have lost property, been displaced from their homes and businesses, and had their lives severely disrupted.”
While the situation has taken a toll on the Zurich-based insurer, Greenberg assured stakeholders that Chubb’s financial impact would likely be confined to the first quarter of 2025. The company has already reduced its exposure in high-risk wildfire areas by over 50%.
Insurance Market Pressures and Chubb’s Strategic Adjustment
Chubb’s payout represents a fraction of the broader blow dealt to California’s insurance market. Industry estimates suggest insurers could face $20 billion to $45 billion in property damage and related claims. For Chubb, which holds a 2.27% share of the California homeowners market, this underscores the challenges of operating in one of the riskiest insurance markets in the country.
Greenberg cited state regulations as a core issue. California’s limits on premium increases prevent insurers from pricing policies in line with the real risks posed by wildfires. “Frankly, it’s an unsustainable model,” he said. Such restrictions, Greenberg argued, discourage insurers from staying in the state and erode incentives for residents to prioritize mitigation.
This challenging climate has compelled Chubb and other major insurers, including Allstate and State Farm, to reduce or entirely halt underwriting in California. The contraction of private insurance offerings has funneled more homeowners into the FAIR Plan, the state’s insurer of last resort.
In Other Insurance News for Chubb – Reports Record-Breaking 2024 Earnings Amid Challenges
Chubb CEO Evan Greenberg proudly announced 2024 as the “best year in the company’s history,” citing record-breaking financial performance during the fourth-quarter earnings call. Chubb excelled despite economic challenges, achieving double-digit growth in operating earnings and earnings per share (EPS). This success is largely attributed to the company’s strategic focus on disciplined underwriting, high-net-worth clientele, and competitive positioning in the commercial middle-market sector.
The company posted a net income of $2.58 billion for the fourth quarter, equating to $6.33 per share, with adjusted earnings of $6.02 per share. Net investment income surged by 13.7%, reaching $1.69 billion. Chubb’s property and casualty (P&C) underwriting income also rose by 7% year-over-year, with a robust combined ratio of 86.6%, reflecting exceptional operational efficiency. Additionally, global P&C premiums written increased almost 10%, while life premiums soared by 18.5% in constant dollars.
Chubb’s high-net-worth customer segment demonstrated particularly strong growth, with premiums climbing 17.6%, fueled in part by a 34% increase in new business. Even as the company prepares to absorb a projected $1.5 billion wildfire-related loss for the first quarter of 2025, its tremendous results in 2024 underpin its resilience in this risk evolving market.