The Association of Bermuda Insurers and Reinsurers (ABIR) announced that its member companies are expected to provide nearly US$10 billion in gross claims payments to US policyholders and cedants in response to the January 2025 wildfires in Southern California.
The Eaton and Palisades fires, now classified as the costliest wildfires in US history, caused extensive property damage, loss of life, and economic disruption.
Data from the Bermuda Monetary Authority (BMA) shows that Bermuda-based insurers and reinsurers may contribute as much as 30% of the estimated insured losses from the event. Additional funding may also be sourced from Bermuda’s insurance-linked securities and catastrophe bond markets.
Industry estimates place the total insured losses from the wildfires at a minimum of US$30 billion, with total economic losses reaching up to US$275 billion. Covered losses include residential, commercial, and industrial property damage, business interruption, evacuation costs, and rebuilding expenses.
Bermuda-based insurers and reinsurers provide global risk capacity by diversifying exposures across regions and perils, including US hurricanes, Japanese typhoons, and Latin American earthquakes. This model, according to ABIR, supports the broader availability and stability of insurance coverage worldwide.
In a March report, ratings agency Fitch stated that the wildfire-related losses would likely impact earnings among Bermuda reinsurers but would not affect their credit ratings, citing strong capital reserves.
In the previous year, Fitch reported that the combined ratio for Bermuda reinsurers was estimated between 85% and 86% in 2023, a marked improvement from 92.7% in 2022, indicating enhanced underwriting profitability.
However, projections for 2024 suggest a slight uptick in the combined ratio to approximately 90%, attributed to increased catastrophe losses, which are expected to account for seven to eight percentage points, up from 3.2 points in 2023.
Economically, the reinsurance sector's contribution to Bermuda was significant. Member companies of the Association of Bermuda Insurers and Reinsurers (ABIR) reported a record-breaking contribution of over US$1 billion to Bermuda's economy in 2023, the highest in the organization's 31-year history.
“For more than 30 years, Bermuda reinsurers have been there for American families, businesses and communities in their darkest hour,” said Mark Cloutier, executive chair of Aspen Insurance Group and Chair of ABIR.
ABIR members play a role in delivering timely claims payments to support post-disaster recovery, Cloutier said.
John Huff (pictured above), CEO of ABIR, commented on the persistent protection gap between insured and economic losses.
“Events like the California fires highlight opportunities for greater public-private cooperation to expand private insurance coverage, leaving taxpayers to bear less of the risk burden,” Huff said.
ABIR has also advocated for loss mitigation strategies, including building hardening and climate risk adaptation. The association signed onto the Insurers’ Principles for Climate Change Adaptation in 2021, developed by the Insurance Institute for Business & Home Safety (IBHS), which outlines approaches to strengthening the resilience of US homes and businesses.
“With an established track record as the best place to put risk capital to work and an industry-leading talent base, Bermuda is well positioned to find solutions to the largest and most complex global risks,” Huff said. “We are committed to strengthening Bermuda’s longstanding trading relationship with the US, and to be ready to respond when our American partners need us most.”
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