Chubb Ltd., a major domestic property and casualty insurer, recently held its fourth-quarter earnings call to address the financial implications of the California wildfires. CEO Evan Greenberg began the call by offering sympathies to those affected by the wildfires and expressing gratitude towards the first responders who have been working tirelessly to combat the fires and assist those in need.
During the earnings call, Greenberg announced an estimated net pre-tax loss of $1.5 billion to be recognized in the first quarter as a result of the catastrophic wildfires in California. This figure exceeded previous projections by $200 million, indicating the significant impact of the wildfires on Chubb's financial outlook. Analysts, including Paul Newsome from Piper Sandler, noted that the loss estimate aligns with expectations, given Chubb's exposure to the affected high net worth area.
In response to questions about the repercussions of the wildfires on California's insurance market, Greenberg emphasized the challenges faced by insurers in the state. He highlighted the difficulties posed by the risk of natural disasters, high costs of reconstruction, and regulatory constraints that hinder fair pricing for risk. Greenberg also pointed out the unsustainable nature of California's FAIR plan, the state-backed insurer of last resort, indicating ongoing concerns about the viability of the current insurance model in the region.
To mitigate risks, Greenberg mentioned that Chubb has been gradually reducing its exposure to the affected area over time and recently decreased its exposure by over 50%. He emphasized the company's commitment to maintaining a reasonable risk-adjusted return on their investments, indicating a strategic approach to managing risks in challenging markets like California.