(Reuters) – Travelers’ profit plunged 60% in the first quarter as its exposure to the Los Angeles wildfires led to a record catastrophe loss of over $2 billion, the insurance bellwether said on Wednesday.
The results shed a light on the fallout from one of the costliest natural disasters in California’s history, which claimed several lives and destroyed property, with some estimates pegging the economic losses at $250 billion.
Insurers in recent years have been battered by natural disasters, especially as events related to extreme weather become more frequent. Some, including Travelers, have tried to reduce exposure to high risk areas.
But even after such efforts, catastrophes as devastating as the California blaze can cause severe damage.
The company’s catastrophe losses, net of reinsurance, were at $2.27 billion for the quarter ended March 31, compared with $712 million a year earlier.
It reported a core profit of $443 million, or $1.91 per share, compared with $1.1 billion, or $4.69 per share, last year.
“We are pleased to report a substantial profit for the quarter despite the devastating January California wildfires,” CEO Alan Schnitzer said.
REGULATORY RESTRICTIONS
Insurers have often complained of stringent regulations in California, which require them to seek the state regulator’s nod before raising prices for most policies.
Industry players say this limits their flexibility to adjust prices according to the risk they take on. Coupled with this, the frequent wildfires make the state an “uninsurable” market, some have said.
“Regulatory policies that disconnect pricing and terms from actual risk drive insurers out of the market, reducing competition and limiting consumer choice,” Schnitzer wrote in a LinkedIn post last month.
Still, critics say tight controls are necessary to prevent expenses from ballooning in a state where the hidden costs of homeownership — which include taxes, insurance and other bills — are among the highest.
The industry is also facing potential disruption from tariffs, which could inflate the cost of building materials and auto parts and drive up repair costs. Insurers will either have to absorb the additional costs or pass them on to consumers through higher premiums.
Since President Donald Trump unveiled sweeping tariffs on April 2, Travelers shares have fallen 5.6%.
(Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber)
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