State Farm General’s Estimated Losses from the Wildfires
State Farm General has calculated the direct losses incurred from the devastating Los Angeles wildfires to be approximately $7.6 billion. After accounting for reinsurance, the company’s retained losses are estimated at $212 million, while their portion of the FAIR Plan losses is around $400 million.
Recently, State Farm General reported that they have disbursed $1.75 billion in response to around 9,500 claims filed as a result of these wildfires. The comprehensive estimate of direct losses, which includes both reported and unreported claims, is projected at $7.6 billion.
Impact on State Farm General’s Financial Position
According to State Farm General, after considering reinsurance recoveries, tax implications, and partial recovery of the company’s portion of the FAIR Plan’s recent $1 billion assessment, the January wildfires are expected to decrease State Farm General’s surplus by roughly $400 million. As of the end of 2024, the company’s surplus stood at $1.04 billion, following a decline of over $300 million from year-end 2023.
Concerns Regarding S&P’s CreditWatch Rating
The insurer expressed significant concern over S&P’s decision to place its ratings on CreditWatch with negative implications. The company stated, “We remain deeply worried about State Farm General’s financial position, as accurately pricing risks in California continues to be challenging.”
State Farm General emphasized the necessity for immediate rate increases to stabilize their finances and avert a potential rating downgrade. The urgency of this need is underscored by S&P’s ‘CreditWatch – Negative’ designation.
Strategic Policy Changes
Reinsurance News reports that State Farm’s losses could have been significantly higher had the insurer not decided to non-renew around 30,000 California property insurance policies in March 2024. Additionally, State Farm General exited the commercial apartment sector, impacting another 42,000 policies, which further mitigated potential losses.
