rewrite this title Insurance stocks sell off sharply as potential losses tied to LA wildfires increase

Insurers exposed to the California homeowners’ market sold off sharply Friday as the devastation caused by the Los Angeles wildfires spread.

Shares of Allstate dropped 6%, while Chubb and Travelers both declined more than 3%. These three stocks were among the biggest losers in the S&P 500 on Friday. AIG and Progressive dipped over 1%.

Allstate, Chubb and Travelers are the most exposed carriers to insured losses in the wildfires, according to JPMorgan. The Wall Street firm noted that Chubb could have a particularly high exposure due to its high-net-worth focus in the region.

The destructive fires this week could become the most costly in California history. The insured losses from this week’s fires may exceed $20 billion, and the estimate could be even higher if fires spread, JPMorgan estimated Thursday. Those losses would far surpass the $12.5 billion in insured damages from the 2018 Camp Fire, which was the costliest blaze in the nation’s history, according to data from Aon.

Moody’s Ratings expected insured losses to run well into billions of dollars given the area’s high values of homes and businesses in the affected areas.

The Palisades Fire is the largest of the five blazes. It has burned more than 17,000 acres, destroying more than 1,000 structures, according to California authorities. Pacific Palisades is an affluent area where the median home price is more than $3 million, according to JPMorgan.

Insurance companies have asked Southern California Edison to preserve evidence related to the devastating wildfires that have swept Los Angeles, according to a company filing to regulators.

Certain reinsurers were also affected. Arch Capital Group and RenaissanceRe Holdings declined 2% and 1.5% on Friday, respectively. JPMorgan believes that rising loss estimates increase the likelihood of reinsurance attachments at various insurers being breached.

— CNBC’s Spencer Kimball contributed reporting.