Lloyd’s of London, the world’s oldest insurance market, has estimated that the recent California wildfires in Los Angeles will result in losses of around $2.3bn. The Eaton and Palisades fires, which ravaged the region in early January, claimed 29 lives, burned more than 37,000 acres, and destroyed over 16,000 buildings. Despite the widespread devastation, the impact on fine art losses was limited because wealthy residents managed to secure their prized collections before the fires spread.
In its latest trading update, Lloyd’s reported a 10% drop in annual pre-tax profits to £9.6bn. Although the wildfire losses will affect the company’s profits for 2025, chief financial officer Burkhard Keese reassured that this event is not expected to be a "capital event," meaning overall capital levels should remain stable.
The increasing frequency and severity of weather and climate disasters are placing growing pressure on the insurance industry. According to data from the National Ocean and Atmospheric Administration, the number of US disasters costing over $1bn has surged from three per year in the 1980s to 27 in 2024, with annual losses averaging $182.7bn.
Lloyd’s has also seen its combined ratio rise from 84% to 86.9% in 2024, reflecting the heightened claims and operational costs from such catastrophic events. Despite these challenges, the group recorded a 6.5% increase in gross written premiums to £55.5bn, bolstered by strong performance in property and reinsurance segments.
The industry continues to face significant headwinds from both human-made and natural catastrophes, but Lloyd’s remains cautiously optimistic that the current challenges will be managed without compromising its overall financial stability.
