Insurer shares slip as analysts eye possible costs of LA wildfires

Investing.com - Shares in several insurance companies, including Allstate (NYSE:ALL ), Travelers (NYSE:TRV ) and Hanover Insurance (NYSE:THG ) fell in early US trading as investors assessed the financial fallout from the deadly Los Angeles wildfires on these businesses.

Damage and economic losses from the fires have been estimated at $135 billion to $150 billion, signaling a long recovery and a spike in homeowners' insurance costs, Reuters has reported, citing private forecaster AccuWeather.

In a note to clients, analysts at Deutsche Bank (ETR:DBKGn ) flagged that in previous significant California wildfires home prices and construction expenses were "considerably lower" than current levels.

"Consequently, a comparable number of damaged structures today would translate to significantly higher insured losses," the analysts led by Cave Montazeri said.

Insurers American International Group (NYSE:AIG ), Chubb (NYSE:CB ), Kinsale Capital (NYSE:KNSL ) and Cincinnati Financial (NASDAQ:CINF ) were also lower on Friday.

Elsewhere, Edison International shares (NYSE:EIX ) dipped after its Southern California Edison division said it had received requests from attorneys representing insurance companies to preserve evidence related to the Eaton Fire in Los Angeles.

In a filing with California regulators, Southern California Edison noted that no fire agency has yet suggested that its electrical facilities were involved in starting the fire. The utility also said it had not had any requests to remove or retain equipment.

The Eaton Fire is one of several wildfires burning through neighborhoods across Los Angeles that have reportedly left tens of thousands of structures destroyed and killed at least 10 people. 

Together with the Palisades Fire between Santa Monica and Malibu, the Eaton Fire near the Pasadena area has consumed more than 34,000 acres, with whole neighborhoods being leveled. They are among the most destructive fires in the history of Los Angeles.

Citing preliminary analysis of electrical circuit information for the energized transmission lines going through the area of the Eaton Fire, Southern California Edison added that there were "no interruptions or electrical or operational anomalies until more than one hour" after the fire broke out.

"Aside from the preservation notices suggesting SCE's potential involvement and significant media attention surrounding the fire, we do not believe this incident meets the reporting requirements," Southern California Edison said.

(Reuters contributed reporting.)

Source: Investing.com