Key Takeaways
- The tragic wildfire that recently destroyed most of Lahaina, Hawaii, is the deadliest in modern U.S. history. The death toll already surpasses that from the 2018 Camp fire, which destroyed the town of Paradise, Calif.
- Insured property losses will be significant, but we don't expect to take any rating actions as a result. The rated property/casualty insurers that are active in the Hawaii property insurance market are large national insurers or part of large multinational insurance groups. Losses for reinsurers are expected to be low.
- Life insurers will be paying death benefits to the survivors of covered individuals who perished, while health insurers will be covering the cost of care for people who were injured. We don't expect to take any rating actions on insurers in either of these markets.
The tragic wildfire that earlier this month destroyed most of Lahaina, Hawaii, is the deadliest in modern U.S. history. The death toll, currently at 110, is still rising as recovery operations continue. It's already well above the death toll from the 2018 Camp fire, which killed 85 people and destroyed the town of Paradise, Calif.
Preliminary estimates for property losses from the Lahaina wildfire indicate that it will not be a major loss event for the U.S. property/casualty (P/C) industry. It will be a long time before more definitive estimates of insured losses are available, but a preliminary analysis published by natural catastrophe modeling firm Karen Clark & Co. estimates insured losses of $3.2 billion. (By comparison, the total insured losses from the 2018 Camp fire in California are estimated to be around $10 billion, according to Bankrate.)
However, we also believe that, because of the area's relatively remote location, chances are high that ultimate loss costs will exceed initial estimates. The demand surge is expected to be substantial as most of the materials needed for rebuilding will have to be brought in either by ship or by plane, which will cause delays. Also, labor costs will likely be elevated because of the limited number of local construction workers; that will mean bringing in workers from elsewhere and paying them enough to offset the high cost of living on the island of Maui.
There's also the potential for business interruption losses across the island, particularly in the hospitality sector--though hotel rooms that had been filled with tourists likely will now be occupied by displaced residents and recovery workers.
Limited Impact On Both Life Insurers And Health Insurers
We believe both U.S. life insurers and U.S. health insurers generally have manageable claims exposure to the wildfire. Health companies with membership in Hawaii include Kaiser Permanente, UnitedHealth Group Inc., Humana Inc., and Centene Corp. Like other natural catastrophes, this event will likely cause immediate physical and behavioral health incidents, particularly for people who suffered smoke inhalation or burns. The strain on Maui health care facilities may disrupt the ability of some members who weren't injured in the wildfire to access health care services and products.
Life insurers will be making death benefit payments to the survivors of some of the people killed in this tragedy, but these will be spread among numerous insurers. And given the relatively small number of claims, this will not materially affect operating results.
Low Impact On Investment Credit Quality
From an investment perspective, insurers have minimal exposure to companies directly affected by this event. According to year-end 2022 data, the life insurance industry's bond exposure to Hawaiian Electric Industries Inc. and its subsidiaries was, on average, less than 1% of group capital and surplus, with some companies having no exposure. P/C and health insurers also benefit from their diversified investment portfolios, with only a handful of companies having very modest exposures.
Ratings Impact Expected To Be Limited
We expect that the wildfire will have no ratings impact on the P/C, life, and health insurers and reinsurers we rate. We believe the most significant exposure is the property risk assumed by primary P/C insurers. By using Karen Clark & Co.'s estimate of insured property losses and allocating losses to insurers based on their share of the Hawaii property insurance market, we estimate that gross exposure as a percent of year-end 2022 statutory surplus is below 5% for all of the rated primary P/C insurers active in that market. Of the 21 rated P/C insurers with a market share of 0.5% or higher, only six have an estimated gross exposure greater than 1% of statutory surplus (see table). Reinsurance protection purchased by primary insurers may reduce the gross loss estimates for some, but we do not expect losses for reinsurers to be material.
Tokio Marine's U.S. P/C operations have an exposure of 3.0%, a figure that includes rated insurer First Insurance Co. of Hawaii Ltd. (FICOH). On a stand-alone basis, FICOH would have a much higher exposure, but we view the entity as highly strategic to its ultimate parent, so the ratings on FICOH benefit from reinsurance and other support provided by the Tokio Marine group.
| Estimated exposure to Maui wildfire for selected insurers | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Based on $3.2 billion industry loss estimate | ||||||||||||||||||
| Hawaii DPW, all lines ($000) | Hawaii DPW/U.S. DPW (%) | Hawaii commercial property DPW ($000)* | Hawaii personal property DPW ($000)§ | Total Hawaii property DPW ($000) | Hawaii property market share (%) | Estimated gross exposure ($000)† | Estimated gross exposure as % of year-end 2022 U.S. statutory surplus‡ | |||||||||||
| RLI | 35,332 | 2.3 | 7,848 | 20,810 | 28,658 | 2.1 | 66,450 | 4.7 | ||||||||||
| MS&AD Insurance | 61,651 | 5.5 | 15,894 | 9,065 | 24,959 | 1.8 | 57,874 | 3.7 | ||||||||||
| Allianz | 77,759 | 1.3 | 43,734 | 0 | 43,734 | 3.2 | 101,408 | 3.2 | ||||||||||
| Tokio Marine | 325,042 | 2.9 | 71,899 | 72,512 | 144,410 | 10.5 | 334,849 | 3.0 | ||||||||||
| Assurant | 16,784 | 0.2 | 5,531 | 2,945 | 8,476 | 0.6 | 19,652 | 1.3 | ||||||||||
| Allstate Corp. | 126,162 | 0.3 | 2,344 | 75,218 | 77,562 | 5.6 | 179,845 | 1.3 | ||||||||||
| USAA | 137,525 | 0.5 | 4,391 | 85,392 | 89,783 | 6.5 | 208,182 | 0.8 | ||||||||||
| AIG | 92,889 | 0.6 | 41,631 | 11,373 | 53,004 | 3.8 | 122,903 | 0.6 | ||||||||||
| Farmers Insurance | 41,801 | 0.2 | 814 | 15,399 | 16,213 | 1.2 | 37,594 | 0.6 | ||||||||||
| Zurich | 66,595 | 0.4 | 18,337 | 0 | 18,337 | 1.3 | 42,519 | 0.6 | ||||||||||
| Liberty Mutual | 133,601 | 0.3 | 7,084 | 50,567 | 57,651 | 4.2 | 133,677 | 0.5 | ||||||||||
| Markel | 61,153 | 0.7 | 9,386 | 1,912 | 11,298 | 0.8 | 26,198 | 0.5 | ||||||||||
| State Farm | 353,072 | 0.4 | 9,995 | 234,512 | 244,507 | 17.7 | 566,946 | 0.4 | ||||||||||
| Progressive | 81,043 | 0.2 | 2,476 | 27,313 | 29,788 | 2.2 | 69,071 | 0.4 | ||||||||||
| Munich Re | 19,933 | 0.5 | 9,951 | 77 | 10,028 | 0.7 | 23,253 | 0.4 | ||||||||||
| Great American Insurance | 38,411 | 0.5 | 6,372 | 0 | 6,372 | 0.5 | 14,774 | 0.3 | ||||||||||
| Fairfax Financial | 59,665 | 0.6 | 6,330 | 5,834 | 12,164 | 0.9 | 28,205 | 0.3 | ||||||||||
| Chubb | 83,588 | 0.3 | 9,764 | 11,109 | 20,873 | 1.5 | 48,399 | 0.3 | ||||||||||
| The Hartford | 32,423 | 0.2 | 617 | 6,955 | 7,572 | 0.5 | 17,558 | 0.1 | ||||||||||
| Nationwide | 31,262 | 0.2 | 8,049 | 979 | 9,028 | 0.7 | 20,935 | 0.1 | ||||||||||
| Berkshire Hathaway Inc. | 303,874 | 0.5 | 7,456 | 116,566 | 124,021 | 9.0 | 287,572 | 0.1 | ||||||||||
| Total P/C industry | 3,182,810 | 0.4 | 526,859 | 853,206 | 1,380,065 | 100.0 | 3,200,000 | |||||||||||
| *Includes allied, fire, commercial auto physical damage, commercial multiperil (nonliability). §Includes homeowners multiperil, personal auto physical damage. †Based on estimate of $3.2 billion in insured property losses. ‡For global insurance groups, includes the statutory surplus of the U.S.-domiciled operating insurance company subsidiaries. DPW--Direct premiums written. P/C--Property/casualty. Sources: Karen Clark & Co. (for industrywide estimate of insured losses) and S&P Global Market Intelligence. | ||||||||||||||||||
Related Research
This report does not constitute a rating action.
| Primary Credit Analysts: | John Iten, Princeton + 1 (212) 438 1757; john.iten@spglobal.com |
| James Sung, New York + 1 (212) 438 2115; james.sung@spglobal.com | |
| Anika Getubig, CFA, New York + 1 (212) 438 3233; anika.getubig@spglobal.com | |
| Secondary Contact: | Taoufik Gharib, New York + 1 (212) 438 7253; taoufik.gharib@spglobal.com |
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