Travelers faces $1.7 billion impact from Los Angeles wildfires

Travelers reported on Tuesday a $1.7 billion impact from the Los Angeles wildfires based on insurance policyholder claims without stating if it will raise premiums significantly in California or nationally to build reserves back, or possibly offer less protection in areas deemed too risky.

Founded in Hartford with headquarters in New York City and offices in St. Paul, Minnesota, Travelers was ranked sixth in 2023 in both California and the United States for property and casualty insurance premiums, according to separate studies by the California Department of Insurance and the National Association of Insurance Commissioners.

State Farm, California's largest insurer, asked regulators in that state last week for permission to raise home insurance rates 22% on an "interim basis" as a result of the California wildfires. Two years ago, State Farm announced it would not underwrite any new policies in California due to elevated claims risk.

A Travelers spokesperson declined to provide information on any impact the Los Angeles fires could have on home and auto insurance premiums in California or nationally, beyond what the company has disclosed in previous statements and conference calls. In a Jan. 22 conference call while work continued to contain the wildfires, CEO Alan Schnitzer made no firm statement on whether the company would look to reduce its policy count and exposurer in areas prone to wildfires.

"We've taken steps to thoughtfully manage our exposure in wildfire prone areas -- others have too," Schnitzer said in January. "The insurance market was challenged going into this. There were some recently adopted reforms, and I think that was a good start. It's possible that this is going to be a catalyst for further and meaningful reforms, so I think we're just going to wait and need to see how that shakes out before we make any decisions."

Travelers indicated tax considerations would reduce its California wildfire exposure to $1.3 billion, inclusive of reinsurance policies it had in effect that allows it to recoup some of its total claims. The company's net profit totaled $5 billion last year, up 67% from 2023.

Despite what Schnitzer called "outsized natural catastrophes" last year, including Hurricane Helene in Florida, Georgia and the Carolinas, Schnitzer said the company's policy underwriting profit was $4.5 billion after taxes. That does not include additional income from its investment portfolios.

Total losses in the Los Angeles wildfires could range between $35 billion and $45 billion, according to real estate analysis firm CoreLogic. Hurricane Katrina remains the most expensive disaster in U.S. history in the context of insurance claims, according to a 2024 analysis by Business Insurance, at $102 billion in property losses, adjusted for inflation.

Travelers had already filed with California regulators to raise premiums on property insurance rates, according to Michael Klein, Travelers' president of personal insurance lines who is based in Connecticut.

"We've been shrinking in California coming into the event," Klein told investment analysts in January. "The California wildfires ... will certainly feed into our assessment of actions we need to take going forward."

Includes prior reporting by Paul Schott.