Wildfires and Image Problems

By Mairi Mallon

Reinsurance News, June 2025

In the wake of the California wildfires, the insurance and reinsurance industry will play a crucial role in helping home and business owners get back on their feet.

The widespread and costly destruction caused by the fires is a perfect example of why insurance exists—to keep the lights on, a roof over people’s heads, and the wheels of commerce turning after such a devastating event.

However, the general public doesn’t seem to always share this view and instead hold misconceptions due to concerns about claims processing.

I feel this is a disturbing state of affairs, taken to an extreme with the tragic murder of UnitedHealthcare chief executive officer Brian Thompson in Manhattan in 2024, that the industry needs to address.

This negative view of the industry is in the main unwarranted when it comes to wholesale/specialty/reinsurance. You only have to look back at some of the most soul-shattering catastrophic events in recent history to see insurers’ primary objective: To help people rebuild their lives.

In 1906, a massive earthquake measuring 8.25 on the Richter scale brought San Francisco to its knees, causing fires that raged uncontrollably for three days, taking thousands of lives and leaving half the population homeless.

Lloyd’s leading earthquake underwriter Cuthbert Heath issued an edict that had a profound effect on the future of the insurance industry and helped rebuild the seventh largest city in the US: “Pay all of our policyholders in full, irrespective of the terms of their policies.”

The earthquake ended up costing Lloyd’s more than $50 million—equivalent to more than $1 billion today. The London insurance market’s reputation for paying valid claims was secured for generations to come.

The 9/11 terrorist attacks, when passenger airlines were hijacked by al-Qaeda terrorists and flown into buildings while the world watched in horror, resulted in nearly 3,000 deaths. The market processed a stream of claims in many different classes. This became Lloyd’s largest-ever single loss. In the years after 9/11, Lloyd’s and the wider London market’s approach seemed to be: Deal now, detail later. By January 2007, 90% of contracts in the subscription market and 88% of contracts in the non-subscription market had achieved certainty.

Following 9/11, Bermudian reinsurers also played a crucial role in supporting the global insurance industry by paying a significant portion of the insured losses, with Association of Bermuda Insurers and Reinsurers (ABIR) members contributing $2 billion in payments.

In 2010, the explosion and sinking of the Deepwater Horizon oil rig in the Gulf of Mexico claimed 11 lives and produced the largest accidental marine spill in the history of the petroleum industry. Insurers paid out more than $600 million.

These are all considerable examples of resilience and recovery by the industry, but our industry—by nature discreet and publicity shy—seldom tells its story in a way it deserves. The industry needs to do a better job of communicating effectively to the public how the industry helps people in their direst hour of need.

Of course, people working in and associated with our industry know all about the importance of insurance to global commerce.

California’s Insurance Commissioner Ricardo Lara’s appeared at the 2025 Bermuda Risk Summit, saying, “We have to engage face-to-face, which allows for more direct answers.”

Lara got some reinsurance companies to agree to expedite payments to wildfire claimants, and that they agreed to work with the state on expanding earthquake insurance. He also said he expects coverage to improve next year when insurers are able to raise their rates to match the risk.

Lara’s plans include speeding up the state’s reviews of insurance companies’ proposed rate hikes, as well as allowing insurance companies to carry out catastrophe modelling for California—along the lines of the modelling used in Florida for hurricanes—that would allow them to take projected losses into account and not just use historical information.

He also plans to raise the amount of coverage given by the FAIR Plan—the last resort insurance plan required by state law, run by a pool of insurers. One in five homes in Pacific Palisade, the Los Angeles neighborhood most affected by the fires, were covered by the FAIR plan.

Our industry understands these complexities, but they are all too often lost in translation to the public, who may perceive that insurers are either delaying responses or declining to provide wildfire coverage.

We need to communicate better with the general public rather than merely talk to each other in a closed shop. There is no doubt that our industry has an image problem stemming from misconceptions that can lead to it being blamed when coverage is deemed insufficient when catastrophe strikes.

It’s time we started telling better stories about our industry—that it is a force for good in an increasingly uncertain world.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

Mairi Mallon is CEO of insurance, reinsurance and insurance-linked securities for Rein4ce. Mairi can be contacted at mairi.mallon@rein4ce.co.uk.