Introduction
In early 2025, the Greater Los Angeles area was severely affected by a series of wildfires, resulting in significant loss of life and extensive property damage. The insurance sector is currently estimating losses to be around $40 billion. In response, Hiscox, a specialist insurer, has activated its retrocession coverage.
Hiscox’s Financial Projections and Response
Hiscox has reported anticipated losses of $170 million from the wildfires. These figures are within the company’s modelled expectations. During the recent full-year 2024 earnings call, Joanne Musselle, Hiscox’s Chief Underwriting Officer, commented: “While not reflected in our current numbers, California experienced a devastating start to 2025 with the Los Angeles wildfires. Our thoughts are with all those affected.”
Musselle emphasized that supporting customers and cedents is the primary focus, with over 70% of losses already compensated. The loss estimate of $170 million is based on an industry loss of $40 billion, with $150 million impacting the reinsurance segment.
Model Change and Reinsurance Strategy
Hiscox credits its accurate loss forecast to the early adoption of Version 12 model changes in late 2024, which significantly increased its wildfire risk projections. Following the wildfires, Hiscox reinstated its retrocession program and acquired additional protection, which is included in the $170 million loss figure.
Musselle elaborated, “Our London Market program remains intact. We’ve reinstated our retro program and purchased additional protection on a second loss basis. We’ve also placed a $200 million catastrophe bond from our retro 1.1 savings.” This cat bond, while unrelated to the wildfires, coincided in timing with the event.
Future Outlook and Financial Performance
Despite the severe impact of the wildfires, Hiscox remains optimistic about executing its plans for 2025. The company’s capital position is robust, and its appetite for business remains steady. Musselle remarked on the potential need for reinstatements for customers, hinting at changes in market rates as the year progresses.
In conclusion, Musselle stated, “While this was an extreme tail event, it was within our modelled expectations. Our ability to execute our 2025 plans remains unchanged.”
2024 Financial Results
Recently, Hiscox reported its 2024 financial results, showcasing a profit of $267.5 million for Hiscox Re & ILS and an improved undiscounted combined ratio of 69%. The segment’s insurance contract written premiums (ICWP) for 2024 grew to $1.03 billion from $986.3 million in 2023, with net ICWP reaching $499.3 million. These figures were driven by additional capital deployment amid favorable market conditions.
The segment’s insurance service result of $165.7 million and an undiscounted combined ratio of 69.0% highlight another year of strong performance.
