The wildfires that have raged across Los Angeles, engulfing nearly 30,000 acres, damaging as many as 10,000 buildings and forcing evacuation of more than 360,000 residents as of Friday, will take a heavy toll on property insurers with exposure in areas affected by the blazes.
The fire is on track to rank among the most expensive natural disasters in American history. Morningstar DBRS estimates insured losses from the infernos to surpass $8 billion, a figure that could change depending on the final count of damaged properties. JP Morgan’s analysts predict that overall insured losses could be higher than $20 billion, a Financial Times report on Thursday suggested.
Even before these catastrophic fires, the property insurance market in California—home to about 40 million people—had struggled due to the mounting risk of wildfires, surging construction costs and regulations limiting insurers’ ability to hike rates. Some of the largest insurers, including State Farm and Allstate, have been quietly pulling out of the Golden State, refusing to either insure new customers or renew existing policies. The latest event may accelerate this insurer exodus, lead to increased premiums and make it even more difficult for homeowners to find affordable insurance in the state.
However, industry participants think the wildfire is unlikely to scare away PE firms from the property and casualty (P&C) market, said Mark Rusas, a managing director and co-head of Mergers & Acquisitions Specialty Practice at Alliant Insurance Services. His team advises PE firms on risk management, insurance and employee benefits.
While some PE firms back insurers that provide personal line P&C insurance covering injuries and property damages, PE is more heavily invested in areas of insurance that won’t be affected by wildfires, such as insurance brokers and managing general agents, he said.
Investments in P&C insurance providers account for a small fraction of overall PE deal activity—merely $7.9 billion in total deal value from 2018 onward, according to PitchBook data.
Still, numerous GPs have been active in this sector in recent years, including Greenwich, CT-based Stone Point Capital, which manages over $55 billion in assets, and Chicago-based GTCR, which oversees $40 billion. In the past, household names such as Apollo Global Management, HPS Investment Partners and Alaska Permanent Fund also underwrote deals valued at millions of dollars backing P&C insurers in California.
The increased frequency of natural disasters has made it more risky to bet on P&C insurers. Some investors have liquidated positions, while others continue to hold these assets
At the end of 2024, 14 P&C platform companies were held by PE firms, according to PitchBook data. The largest recent deal was Stone Point Capital’s $2.9 billion take-private of AmTrust Financial Services in 2018. Core Specialty Insurance was recapitalized in a $610 million deal in 2020 with backing from SkyKnight Capital, Dragoneer Investment Group and Aquiline Capital Partners.
Here’s a roster of GPs who have made the most deals in this sector since 2010. The list doesn’t reflect their current exposure to the space.
Data analysts Collin Anderson and Charlie Farber contributed to the article.
Correction: A previous version of this article incorrectly named Athene Holdings and Skyward Specialty as examples of PE-backed providers of personal line P&C insurance, citing an interviewee. (Jan. 13, 2025)
Featured image of a fire burning Tuesday in Los Angeles by Qian Weizhong/Getty Images
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