Chubb Ltd. (NYSE:CB), one of the largest domestic property and casualty insurers, held its fourth-quarter earnings call on Wednesday and addressed the future financial impacts resulting from the recent California wildfires. 

The Details: Chubb CEO Evan Greenberg opened the call by expressing his condolences to the wildfire victims and gratitude to the first responders. 

"We’re doing all we can in small and big ways to ease their burden. Our thoughts are with those who have suffered, and our gratitude goes to those firefighters and emergency workers who served tirelessly," Greenberg said. 

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The Chubb CEO then estimated losses from the wildfire catastrophe at $1.5 billion net pre-tax to be recognized in the first quarter. 

Piper Sandler analyst Paul Newsome said that given Chubb's exposure to the high net worth area that was affected, investors will likely see Chubb's current loss estimate as in-line or less than what they had expected. 

BofA Securities analysts had previously projected $1.3 billion in first-quarter catastrophe losses resulting from the wildfires. Chubb's current estimate exceeds that figure by $200 million. 

Chubb's CEO Greenberg also addressed an analyst's question regarding the fallout from the fires on California’s troubled insurance market. 

Greenberg said California is a "difficult" market for insurance companies due to the risk of natural disasters, high cost of reconstruction and state regulations that "suppresses the ability to charge a fair price for the risk."

He pointed to California's FAIR plan, its state-backed insurer of last resort, as also underpriced. 

"Frankly, it’s an unsustainable model. And one way or the other, the citizens of the state pay the price for coverage," Greenberg said. 

The CEO explained that Chubb has been reducing its exposure to the affected area "for some time" and reduced its exposure now by over 50%. 

"We’re not going to write insurance where we cannot achieve a reasonable risk-adjusted return for taking the risk," Greenberg concluded. 

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