Hippo’s Estimated Losses and Strategic Decisions Following Los Angeles Wildfires
Home insurance provider Hippo has announced an estimated pre-tax loss of $42 million, net of reinsurance recoveries and subrogation, due to the Los Angeles wildfires in January 2025. The company has also revealed its decision to sell its subrogation rights related to its share of losses from the Eaton wildfire.
Hippo’s $42 million loss tally includes assessments from the California FAIR Plan and approximately $12 million in losses connected to non-Hippo programs facilitated by its Spinnaker fronting operation. About $30 million is directly attributed to the Hippo Home Insurance Program.
Recently, Hippo entered into an agreement to divest its subrogation rights specific to the Eaton outbreak, anticipating gross savings of around $15 million and net savings of $11 million, which are factored into the loss estimate. “We believe the proceeds from this sale compare favorably with what we could have achieved by pursuing our subrogation claims through the legal system,” states Hippo.
Unlike many insurers who prefer to pursue subrogation claims legally, Hippo’s strategy involves selling these rights early, enabling quicker capital access, avoiding potential delays of months or even years.
Rick McCathron, Hippo President and CEO, remarked, “As a native of Southern California, these events are deeply personal to me. I am proud of Hippo’s quick and compassionate response—arranging temporary housing, offering accelerated payouts, and collaborating with our builder partners to find ways to shorten the rebuilding process.”
Reports suggest strong evidence that utility equipment caused the Eaton wildfire. Last month, US insurer Mercury General stated its intention to “aggressively pursue subrogation” for the Eaton event.
Subrogation involves the legal right of insurers to seek recovery from a third party at fault for a loss, thereby enabling the insurer to recoup the claim amount paid to the insured.
