Insurance and utility stocks with California exposure took a hit Friday as Los Angeles firefighters continued to attempt to contain wildfires that have destroyed thousands of structures and left at least 10 people dead.
Shares of Allstate (ALL), the Travelers Companies (TRV), Chubb (CB), Mercury (MCY), and American International Group (AIG) — some of the top commercial property and private market homeowner insurers in the state — posted losses.
Mercury stock suffered the steepest decline, dropping nearly 20%. Roughly one-fifth of the homeowners’ insurance premiums the company collects in the US come from California, according to Moody’s. Meanwhile, Allstate fell 5.6%, Travelers sank 4.3%, and Chubb dipped 3.4%. AIG dropped just over 1%.
“It will take weeks or months to determine the magnitude of the insured damages, but the Los Angeles wildfires are likely among the most costly wildfires in the state’s history,” Moody’s insurance analysts said in a note Thursday.
The analysts said they expect insured losses to run “well into the billions of dollars, given the high value of homes and businesses in the affected areas, and to cause large losses for P&C insurers with significant homeowners and commercial property market share in Los Angeles.”
The losses come just as the state tries to lure insurers back amid more frequent, intense wildfires thanks to climate change.
JPMorgan doubled its estimate of insured losses from the fires Thursday to $20 billion from its prior estimate of $10 billion the day before. That estimate could climb as the fires continued to rage Friday.
Utility stocks also came under pressure. Shares of Edison International (EIX) — the parent company of Southern California Edison, which serves Los Angeles — recorded a weekly loss of roughly 19%. SCE said its equipment was not responsible for sparking the fires.
In the case that SCE was found responsible for sparking the fire, its liability would be capped at $4 billion, JPMorgan insurance analysts wrote in a note Thursday.
As of Friday, some 246,000 Californians were without power, with about 173,000 of those residents having power shut off by Southern California Edison for safety reasons (to avoid the spread of the wildfires).
Fellow utility stock Pacific Gas and Electric (PCG) stock, which serves northern California, was down nearly 11%.
PG&E has faced over $30 billion in legal claims for its role in past California wildfires, prompting the utility to file for Chapter 11 bankruptcy in 2019 — dubbed by Harvard researchers as “the first climate change bankruptcy.”
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