
South Korean insurers are bracing for losses from the massive wildfire in Los Angeles, with DB Insurance and Korean Re bearing the largest impact, costing them approximately 90 billion won ($61.8 million).
Industry sources indicate DB Insurance holds the largest exposure, with 37 active policies in the affected areas -- 34 home insurance contracts in Altadena and three small business insurance contracts in Palisades, the two regions hardest hit by the recent wildfire.
A DB Insurance official stated the company expects costs to remain below 60 billion won, emphasizing that the financial impact is manageable.
"While the full extent of the damage will only be clear once the fire is fully extinguished, our preliminary estimate of 50 billion to 60 billion won is within the company’s capacity," the official said, adding that the firm will conduct thorough investigations and ensure prompt claim payments to support recovery efforts.
Market watchers at SK Securities and Shinhan Securities offered a similar outlook, noting that excess of loss reinsurance would cap losses beyond a certain threshold.
"Natural disasters, such as the recent wildfire, are typically covered under 'Event XOL' reinsurance arrangements, where the primary insurer absorbs losses up to the excess point, and reinsurers cover amounts beyond that," a report from SK Securities' Research Center stated. "Factoring in the excess point, losses for DB Insurance are estimated to peak at around 50 billion to 60 billion won."
While additional expenses, such as reinstatement premiums, may arise, these costs are unlikely to materially affect the company's overall profitability, the report added.
Hanwha Securities projected a slightly stronger impact, exceeding 100 billion won, referencing the total 180 billion won paid out in 2023 for natural disasters in Hawaii and Guam.
Korean Reinsurance Company, or Korean Re, a local reinsurance firm with operations in LA, is projected to face minor damage, with losses estimated between 15 billion and 30 billion won, according to industry estimates.
Two other Korean insurers, Hyundai Marine & Fire Insurance and Samsung Fire & Marine Insurance, are also operating in the area but have not reported any fire-related damage yet.
Los Angeles continues to grapple with a devastating wildfire that has claimed at least 25 lives and destroyed more than 12,000 homes and structures. The fires started with the Palisades blaze on Jan. 7, followed by multiple blazes across California. As of now, the 24,000-acre Palisades fire is 45 percent contained, while the 14,000-acre Eaton fire remains just 21 percent suppressed.