Bermuda insurers and reinsurers estimate they will incur gross claim losses of almost $10 billion in payments to policyholders and cedants in the United States to cover the damaging effects of the January California wildfires.

The BMA said in an update to the market that the resultant economic losses were estimated at between $250 billion and $275 billion, with industry-insured losses estimated to be at least $30 billion, based on publicly available estimates from catastrophe risk modellers and insurance industry analysts.

“Consequently, Bermuda firms may incur up to 30 per cent of the insured losses,” the BMA said.

The authority discovered this information through its US Data Claims Survey of 119 reinsurers, completed in March.

Meanwhile, the Association of Bermuda Insurers and Reinsurers added: “In times of catastrophes, Bermuda (insurers and) reinsurers have provided protection and peace of mind for Americans for over 30 years. The Bermuda market plays a critical role in supporting American families, businesses and communities.

“Bermuda’s powerhouse capital and capacity is stepping up to support the recovery that will be required from the California wildfires.

“The BMA statement points out how Bermuda (insurers and) reinsurers expect to fund nearly 30 per cent of the insured cost of the recovery from the California wildfires.

“The estimates of gross losses and claims paid are expected to be even higher, when the data is updated to include the Bermuda insurance linked securities figures.”

One of the costliest wildfire events in American history was intensified by hurricane-force winds and drought conditions. The wildfires burnt vast acres of land and caused catastrophic damage to property, and loss of life.

The BMA said its loss estimate included property damage, evacuation, business interruption and additional living expenses across residential, commercial and industrial lines.

The statement added: “It also considers reconstruction costs after the wildfires, including clean-up, permit fees, code improvements, and potential law and ordinance expenses.”

BMA chief executive Craig Swan said this demonstrated Bermuda’s crucial role in supplying risk capacity to the US and other regions prone to catastrophes.

He said: “The ability of US insurers to cede risk to Bermuda enables diversification of risk globally and helps stabilise insurance costs for customers residing in catastrophe danger zones.”

Mr Swan added: “Nevertheless, the significant disparity between the economic and insured losses remains a societal concern, underscoring the need for stronger public-private partnerships and increased collaboration among regulators, insurers and other stakeholders to address the protection gap.”

The BMA concurred with Abir, stating that the island had a proven track record of standing by US policyholders when catastrophes occur, with the island’s insurers and reinsurers paying significant portions of insured losses for the costliest weather events in recent history.

For example, Bermuda firms estimate they incurred industry insured losses of up to $31 billion or 30 per cent, of hurricanes Harvey, Irma and Maria in 2017, $13 billion (25 per cent) of Hurricane Ian in 2022 and $2 billion (20 per cent) of Hurricane Helene last year.

Gerald Gakundi, BMA deputy managing director, supervision (insurance), said the difficult task of rebuilding after destruction at the scale of the California wildfires continued despite numerous obstacles.

He added: “During such challenging times, which have devastated lives and destroyed communities, the ability of Bermuda insurers and reinsurers to respond quickly in settling claims supports the essential rebuilding efforts.”