Despite substantial financial setbacks stemming from the California wildfires in January 2025, S&P Global Ratings maintains that these events are primarily an earnings concern. This perspective suggests a limited impact on global markets, though notable implications for US renewals are anticipated, as explained by Taoufik Gharib, Director & Lead Analyst, Reinsurance Ratings.
During S&P’s Fourth Quarter U.S. Insurance Webinar, Gharib highlighted that the wildfire losses are expected to drive changes in pricing for the upcoming renewal cycles. “We believe such losses will influence pricing trends moving forward,” he stated. “However, our discussions with key market players indicate this impact will be more pronounced in US renewals than in global ones.”
Gharib further noted potential rate pressures in upcoming renewals, particularly in Japan, with increases possibly reaching 10%. “Nevertheless, given the magnitude of the California losses, we foresee a strengthening of rates, particularly within the US market,” he added.
He underscored the classification of the wildfires as an earnings event, considering their timing early in the fiscal year. “While these fires accounted for up to 40% of the annual catastrophe budgets, they remain an earnings issue for the year,” he remarked.
Global reinsurer Swiss Re recently reported that its wildfire-related losses represented approximately 35% of its full-year 2025 natural catastrophe budget of €2 billion.
Gharib continued, “In the first quarter, some reinsurers might report underwriting losses due to these wildfires and other events. However, we maintain that, over the full year, companies are poised to achieve robust earnings.”
S&P reiterated this viewpoint in a report, asserting that global reinsurers should manage the impact effectively, with losses falling largely within their natural catastrophe budgets for the first quarter of 2025.
Nonetheless, S&P cautioned that the wildfires could markedly affect homeowners, as property insurers might opt to raise rates and/or restrict coverage options in the affected regions.
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