Lloyd’s of London estimates losses of approximately $2.3 billion (£1.78 billion) from the devastating wildfires that swept through Los Angeles earlier this year. However, losses in fine art were

minimal as wealthy residents evacuated with their valuable collections.

The Eaton and Palisades fires, which ignited in early January, led to the deaths of 29 people and took 24 days to be fully contained. The fires scorched over 14,973 hectares (37,000 acres), destroying more than 16,000 buildings.

In its latest trading update ahead of full-year results expected on March 20, Lloyd’s reported a 10% decline in annual pre-tax profits, down to £9.6 billion. Though the wildfire losses won’t be reflected in its 2024 results, the insurance market anticipates they will impact 2025’s earnings.

Lloyd’s Chief Financial Officer, Burkhard Keese, expressed sympathy for those affected, stating, “We are still assessing the full impact, but we do not expect this to be a capital event.” This suggests that while the wildfires will reduce profits, they are not expected to weaken Lloyd’s overall capital reserves.

The fires devastated affluent areas, including the Pacific Palisades, home to significant 20th-century architecture, such as works by Austrian modernist Richard Neutra. While initial concerns pointed to potential significant losses in fine art, Lloyd’s confirmed that most claims were related to reinsurance payouts for home insurance. Keese told the Financial Times that many high-net-worth individuals took their artwork with them, emphasizing, “Even if you get the money, you can’t replace your Rembrandt.”

The global insurance industry faces massive losses from the wildfires, with estimates reaching up to $40 billion, according to data firm Milliman. Keese noted that both human-caused and natural catastrophes would likely sustain elevated commercial insurance costs, even as some industry observers predicted rate declines due to a milder US hurricane season.

Data from the National Oceanic and Atmospheric Administration (NOAA) underscores the rising frequency and cost of extreme weather events in the US. The number of billion-dollar disasters has surged from an average of three per year in the 1980s to 27 in 2024, with annual losses escalating from $22 billion to $182.7 billion over the same period.

Lloyd’s also reported a rise in its combined ratio—a key measure of claims and expenses versus insurance premiums—from 84% in the previous year to 86.9% in 2024. This increase reflects large payouts from US hurricanes Helene and Milton, as well as claims stemming from the Baltimore bridge collapse. Despite these challenges, Lloyd’s saw a 6.5% rise in gross written premiums, reaching £55.5 billion, driven largely by growth in property and reinsurance. Photo by Fred Romero from Paris, France, Wikimedia commons.