Wildfire Losses in California Shock the Insurance Industry

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Incendios en California 2025 | Wikipedia
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The more than 30,000 acres affected by wildfires in California have already been classified as catastrophic, with at least 24 dead and 16 people missing, according to figures shared Sunday night (local time) by California Governor Gavin Newsom.

While the threat continues due to climatic conditions and some hotspots remain uncontrolled, economic damages are estimated to exceed $250 billion, according to Monday’s report from AccuWeather.

These costs could represent enormous losses for the insurance industry. According to a J.P. Morgan Chase report released Thursday, the impact could reach $20 billion.

J.P. Morgan insurance analysts assessed the exposure of residential and commercial property insurance lines in light of the wildfires that have devastated communities in the Los Angeles area, including Pacific Palisades and Altadena.

“Expectations of economic losses from the fires have more than doubled since yesterday, approaching $50 billion, and we estimate that insured losses from the event could exceed $20 billion (or even more if the fires remain uncontrolled),” wrote J.P. Morgan analysts, as reported by Fox News.

Furthermore, the report clarifies that these figures, which will continue to be updated, make these fires the “most severe” event in terms of insured losses in California’s history.

Challenges for the Insurance Industry

Analysts say this catastrophe has exposed the problems facing the insurance industry in the West Coast state of the U.S.

In this regard, Gavin Jackson, finance and economics correspondent for The Economist, commented on The Intelligence podcast that California’s insurance market is flawed.

The expert noted that many insurance companies have stopped selling policies entirely in the state. For instance, Jackson mentioned that in March, State Farm, one of the largest insurers in the U.S., canceled 30,000 homeowner insurance policies in California due to the risk of wildfire losses.

Additionally, experts argue that California regulations prevent companies from implementing the high premium prices that insurers believe align with the risk of living in areas prone to climate-related events.

However, California insurers are “acting as financial first responders to help their affected clients,” according to the Insurance Information Institute.

The institute states this includes providing immediate assistance through additional living expense coverage for displaced policyholders, with property and vehicle losses covered up to policy limits.

The institute also highlights that California regulations require property insurers to immediately pay policyholders at least one-third of the estimated value of their personal belongings and a minimum of four months’ rent in the area they reside.

Nevertheless, affected individuals can also seek other forms of state assistance, such as tax relief.

What Is Disaster Tax Relief?

Certified Public Accountants suggest basic tax strategies to help disaster victims recover, such as proposing tax relief for catastrophes.

Disaster tax relief encompasses various provisions designed to assist taxpayers affected by federally declared disasters. Recent examples include the 2025 Los Angeles wildfires, Hurricanes Helene and Milton in 2024, last year’s New Mexico floods, among others.

While tax relief measures may vary depending on the nature and location of the disaster, a detailed evaluation of each disaster is always necessary.

However, typical provisions often include deadline extensions, casualty loss deductions, penalty waivers, or tax-free aid.

64% of Americans Are Confident They Will Meet Their Financial Goals in 2025

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Three in ten Americans (64%) are confident of achieving their financial goals despite persistent economic pressures, according to New York Life’s 2025 New Year Outlook Wealth Watch. 

 Americans’ optimism is similar to that of 2023. However, 43% of respondents reported feeling less financially secure than they did last year, which the survey says highlights the ongoing stress of inflation and rising debt

The study reveals that debt continues to weigh heavily on Americans, with 67% of adults carrying debt, including an average credit card balance of $8,295, a slight increase from 2023. In addition, inflation impacted 49% of Americans in 2024 and is expected to remain a concern in 2025. 

Generational trends reveal wealth disparities, specifically in savings and debt management. According to the survey, millennials led in savings during 2024, averaging $12,004.87, while Baby Boomers saved the least at $3,466.13. Meanwhile, Gen Xers reported the highest average credit card debt, at $10,141. 

Despite the ongoing economic uncertainty, Americans are creating proactive financial strategies. According to the survey, 73% of adults are adjusting or revising budgets for 2025. Despite this, only 26% feel confident in their financial plans, and just 15% plan to consult a financial professional in 2025. 

“Americans are navigating financial uncertainty, but working with professionals can provide clarity and confidence,” said Jessica Ruggles, New York’s corporate vice president of Financial Wellness. 

The survey found that optimism endures, with 76% expected to retire at their desired age of 65. Emergency savings also increased, with Americans averaging $18,483 at the end of 2024, up from $15,028 the year prior. 

The Five Investment Mistakes to Avoid During a Crisis, According to Julius Baer

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Five investment mistakes in a crisis
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So far, and fortunately, most economic projections for 2025 are far from catastrophic, although experts believe there is a fair amount of uncertainty. Since a crisis can never be ruled out, we summarize a note from Julius Baer highlighting the five mistakes to absolutely avoid.

Diego Wuergler, Director of Investment Advisory, offers guidance on how to best face a crisis.

But let’s start with definitions: What is a market correction?

“A financial crisis is defined as a sharp market correction of around 40% to 50%, in contrast to a typical market correction, which usually ranges between 10% and 15%,” explains Diego Wuergler.

“In the past 25 years, we’ve seen three of these major corrections. So, we can do the math. Roughly every ten years, we could expect a significant market drop.”

Avoid These Five Investment Mistakes During a Crisis

Mistake 1: “Let’s sell for now and wait for the dust to settle.”

The equivalent for investors holding a lot of cash would be: “Let’s hold onto the cash and wait for the dust to settle.”

The alternative view: Instead of selling out of panic or waiting too long, it’s much better to build solid exposure structured around well-defined long-term investment themes from the start. Examples include investing in U.S. equities, automation and robotics, cybersecurity, energy transition, artificial intelligence and cloud computing, and longevity. Since these themes represent long-term structural trends, short-term market corrections should not undermine their underlying logic.

Mistake 2: “The market is wrong.”

The market is not wrong; we, as individuals, are wrong. At any given moment, the market reflects all publicly available information (fundamentals) as well as investor psychology (momentum).

The alternative view: Never fight a trend. Most of the time, several weeks or months later, we understand why the current market is trading at its levels. It’s better to listen to what the market tells us and adjust only when a trend changes. The current secular bull market began in May 2013. On average, such periods last between 16 and 18 years.

Mistake 3: “This time is different.”

This belief is a common trap in investing. We may have felt this way recently due to experiencing an unprecedented global pandemic, but the context is always different. For example, during the tech bubble of 2000, sky-high valuations dominated the conversation, while the 2008 financial crisis was marked by the collapse of the financial system, not the market itself.

The alternative view: What never changes in a financial crisis is our behavior or reaction, which is always based on greed and fear. Once the nature of market corrections is understood, it becomes much easier to control emotions and avoid making counterproductive decisions.

Mistake 4: “I can’t sell this stock at such a loss. Let’s hold onto it for a while and see what happens.”

Avoiding a loss (and holding onto zombie stocks) is one of the worst strategies, according to Diego Wuergler. Usually, “what happens next” is absolutely nothing, as these stocks go nowhere.

The alternative view: A crisis changes the world. It clearly defines the winners and losers, so you need to quickly sell the losers. Don’t hold onto cash but reinvest it in structural winners. An unrealized loss is still a loss. As Deputy Chief Investment Officer Michel Munz of Julius Baer also pointed out, the best way to recover quickly from previous losses is to ensure that what we have now will outperform in the future.

Access the full article at this link.

Financial Education in the AI Era: A Virtuous Cycle for Efficient Money Management

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Financial education in the AI era
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The emergence of the internet in the 1990s marked a turning point in how we interact with our money. Everyday actions, such as checking a bank account balance or making an instant transfer—now routine—were revolutionary at the time, because information about investments and personal finance was exclusively in the hands of experts, advisors, and brokers.

Today, we are experiencing a shift of similar magnitude: in an increasingly technology-driven world, Artificial Intelligence (AI) is revolutionizing how we manage our money by facilitating access to digital tools that allow us to optimize our finances more effectively and intelligently.

According to a survey by BMO Financial Group, more than a third of Americans (37%) use Artificial Intelligence to manage their personal finances. What once required hours of planning and advice can now be accomplished in just a few seconds, and from the comfort of home. However, the adoption of these technologies also raises questions about the balance between automation and financial knowledge.

According to the survey, the most common uses people give to this technology are to learn more about finances, create and update household budgets, identify new investment strategies, accumulate savings, and develop or improve personalized financial plans. However, the benefit of incorporating this technology also lies in the use given by financial experts, who, by delegating routine tasks to algorithms, can focus on developing more inclusive, client-centered solutions. This, in turn, generates direct benefits for each individual’s financial health, as professionals can offer more personalized and strategic advice, merging human intuition and experience with the advanced data analysis provided by technology.

However, the fact that AI simplifies money management does not mean that learning the basics of finance is no longer necessary. In fact, a study by Junior Achievements revealed that 70% of young people consider financial and economic education as the most important subject they should receive in school. Understanding terms such as budget, savings, credit, and investment remains indispensable for acquiring a solid foundation that protects us and allows us to maintain control of our finances instead of delegating it entirely to algorithms. These skills are essential for developing good financial health, that is, the ability to efficiently and sustainably manage our resources over time.

Here lies the virtuous cycle between Artificial Intelligence and financial education: both feed into each other, creating a synergistic relationship in which, to achieve efficient use, one cannot thrive without the other. Promoting access to AI-based financial technologies demands that people understand the basic principles of money management. But, in turn, AI provides the financial education necessary for users to learn to efficiently manage their resources and achieve positive and sustainable financial health.

In many countries in Latin America, where economies are more unstable and opportunities more limited, taking advantage of this virtuous cycle represents a unique opportunity to drive social progress and democratize access to financial information. Today, technological innovation plays a central role, and it is precisely information that is at the heart of AI. Therefore, if used properly, financial education can become a transformative tool, with the power to build a more inclusive and economically fair society for everyone.

About the author:
Sofía Gancedo, Bachelor in Business Administration from the Universidad de San Andrés, Master in Economics from Eseade, and Co-Founder of Bricksave.

2025: A Year of Uncertainty Following a Positive 2024 for Credit Ratings

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2025 uncertainty for credit ratings
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Significant central bank rate cuts, healthy balance sheets, and a global economic growth slowdown of only 0.2 percentage points support a broadly neutral credit outlook for 2025, according to Fitch Ratings.

However, the ongoing economic slowdown in the United States and China, the fragility of the eurozone’s recovery, significant uncertainties surrounding U.S. economic policy, and geopolitical flashpoints pose key credit risks.

The year 2024 was marked by a combination of U.S. economic resilience, a tentative eurozone recovery, strong capital markets, and positive rating trends. Major global credit risks, including those stemming from inflation, geopolitics, and contagion from stressed valuations in key asset classes such as U.S. commercial real estate and Chinese residential real estate, did not materialize. The likelihood of a hard landing has diminished, even as the global economic cycle remains in recession, with both the U.S. and China expected to continue slowing in 2025.

Fitch’s ratings performance reflected a broad normalization of economic and credit conditions since the pandemic. The balance of positive and negative rating outlooks has returned to being nearly even for both investment-grade and below-investment-grade categories.

However, the agency warned of “significant risks and uncertainties.” The incoming Trump administration is expected to materially increase tariffs, raising the risk of a global trade war with negative implications for growth. Other potential U.S. policy priorities, such as tightening immigration restrictions and implementing tax cuts, could add to inflationary pressures. Political uncertainty in the U.S. will have global ramifications, posing a significant potential credit-negative factor for Europe, Asia, and other major U.S. trading partners. Global geopolitics in Europe and Asia remains a key risk.

Ready, Set, Go…: 124 Trillion Dollars Will Change Generations by 2048

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$124 trillion generational wealth transfer
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With trillions of dollars changing hands annually, the “Great Wealth Transfer” is in full swing. Amid the acceleration of wealth transfers, it is crucial for wealth managers, asset managers, and other industry participants to adopt best practices with their current relationships while also adjusting their service and product strategies to align with the future profile of the high-net-worth segment, according to the Cerulli report titled High-Net-Worth and Ultra-High-Net-Worth Markets in the U.S. 2024.

Cerulli estimates that wealth transferred by 2048 will reach $124 trillion, with $105 trillion expected to be inherited by descendants and $18 trillion directed to charitable causes. Specifically, nearly $100 trillion will be transferred by baby boomers and older generations, representing 81% of all transfers. More than 50% of the total transfer volume ($62 trillion) will come from high-net-worth and ultra-high-net-worth (HNW/UHNW) individuals, who collectively represent just 2% of all households.

“Projections for horizontal or intra-generational transfers indicate that $54 trillion will be transferred to spouses before eventually being inherited by descendants and charitable organizations. Nearly $40 trillion of these spousal transfers will go to widowed women from the baby boomer and older generations, creating a massive need and opportunity for providers in the wealth and asset management spaces,” the Cerulli report states.

Additionally, Millennials will inherit more than any other generation in the next 25 years ($46 trillion). However, Generation X will receive the majority of assets over the next 10 years, totaling $14 trillion compared to $8 trillion for Millennials. “Eventually, most of the wealth from older generations in the United States will be donated or transferred to Generation X or Millennial heirs. With $85 trillion earmarked for these generations collectively, providers who can establish relationships and adequately address the needs of these younger investors will be well-positioned for success,” explains Chayce Horton, senior analyst at Cerulli.

Considering these intergenerational and familial movements, Cerulli emphasizes that developing relationships with clients’ spouses or children is one of the primary long-term growth strategies among high-net-worth practices, as the urgency grows for wealth to transition from primary clients to their spouses and children. According to 89% of firms surveyed by Cerulli in 2024, holding family meetings and maintaining regular communication among family members is a key practice.

“Ultimately, there are notable differences in service and product preferences between women and next-generation clients compared to the current client demographic. As wealth transfers, these differences will likely shift market share in favor of firms best prepared to meet the needs of these recipients,” Horton concludes.

Lower Taxes and More Disclosure: How Luxembourg Supports the Growth of Active ETFs

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Luxembourg supports active ETFs growth
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The Association of the Luxembourg Fund Industry (ALFI) believes that the European ETF market holds significant potential for growth and development. As the largest center for actively managed funds and the second-largest domicile for ETFs in Europe, Luxembourg is looking to capitalize on the rise of active ETFs and active ETF share classes. To achieve this, it has introduced several measures to make the creation of these vehicles more attractive.

According to ALFI, active ETF share classes offer managers the opportunity to expand their range of traditional products, enabling investors to access established strategies with the added benefits of the ETF format.

In recent months, Luxembourg’s investment fund industry has worked closely with lawmakers and regulators to develop various initiatives aimed at enhancing the country’s appeal for ETFs.

First, on December 11, 2024, the Luxembourg Parliament approved Bill 8414, which exempts active ETFs from the subscription tax, starting in 2025. “The new law extends the subscription tax exemption, which currently applies to passive ETFs, to active ETFs,” ALFI highlights.

Second, on December 19, 2024, the CSSF published an FAQ allowing the deferral of the disclosure of an active ETF’s portfolio composition. According to ALFI, this information must be disclosed at least monthly, with a maximum delay of one month. They consider this new transparency regime to provide a safe harbor for actively managed ETF strategies while implementing an efficient approval process for ETF products.

“The new transparency and tax regime for ETFs domiciled in Luxembourg provides asset managers with an exceptionally attractive framework in Europe. The active ETF market is growing rapidly, and Luxembourg, Europe’s largest cross-border investment fund domicile, is well-positioned to leverage this momentum,” says Jean-Marc Goy, ALFI President.

In the opinion of Corinne Lamesch, ALFI’s Deputy Director and General Counsel, “Luxembourg has a proven track record in launching active ETF share classes within existing UCITS funds. By incorporating active ETF share classes into already established active strategies in Luxembourg, asset managers can diversify their distribution channels and expand their reach in global markets.”

Janus Henderson Receives Regulatory Approval to Open Its Office in Mexico

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Janus Henderson expandirá operaciones en México
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After Janus Henderson Investors, a UK-based investment firm, announced in January last year its intention to open a representative office in Mexico, the asset manager finally received approval from the country’s financial authorities in the closing days of last year, according to the regulator’s official publication.

“The members of the Board of Governors of the National Banking and Securities Commission, based on Article 12, Section XV of the Law of the National Banking and Securities Commission, in relation to Article 159 of the Securities Market Law and the first paragraph of Rule Four of the regulations for representative offices of foreign financial entities, unanimously agreed to authorize the establishment in Mexico of a representative office of Janus Henderson Investors UK Limited,” reads the authorization granted by the  Comisión Nacional Bancaria y de Valores (CNBV) and published in the official gazette of the Latin American country.

According to industry sources, the representative office in Mexico will be headed by Christian Constandse. The executive, with more than 18 years in the industry, brings extensive experience in public and corporate pensions and the institutional market in general. Previously, he served as Director of Institutional Business for Mexico at BlackRock. He also spent over eight years at Grupo Bursátil Mexicano (GBM) as Director of Equity Portfolio Management and four years at Banco de México as an economist.

Currently, the European asset manager oversees approximately $308 billion in assets, has over 2,000 employees, and operates 25 representative offices worldwide, including the newly authorized office. In addition, it is listed on the stock exchanges of the United Kingdom and New York.

Wellington Management Launches First Interval Fund

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Wellington Management lanza su primer fondo interval
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Wellington Management has launched its first interval fund, the Wellington Global Multi-Strategy Fund, aiming to provide consistent returns across market cycles while managing risks and minimizing volatility. The fund, managed by Roberto Isch, CFA, utilizes a multi-strategy approach combining various trading methods and risk management. Thus targeting long-term investors seeking diversified portfolios. 

The fund’s structure, combining hedge fund strategies with open-end fund features, allows access to alternative investment strategies previously available to institutional investors. It is created to offer diversification, specifically in volatile markets when traditional asset classes like stocks and bonds are highly correlated. 

This launch is part of Wellington’s effort to expand its alternative investment offerings. It provides U.S. wealth investors more extensive access to strategies once limited to institutions. The fund targets those looking for portfolio diversification amid unreliable traditional diversifiers. 

“We are introducing a distinct global multi-strategy interval fund to provide a broader range of wealth clients exposure to a potentially valuable portfolio diversifier,” said Mark Sullivan, Head of Hedge Funds at Wellington 

With over 30 years of hedge fund experience and $30 billion in hedge fund assets under management, Wellington continues to grow and innovate in providing tailored investment solutions.

The Phrases of 2024 in Funds Society Americas

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Frases de 2024 en Funds Society Americas

The U.S. elections and Donald Trump’s subsequent victory, the ETF boom, the future of wealth management, and global wealth were some of the topics that left quotes defining the year.

Expert from XP, São Paulo, September 2024

Alberto Bernal, Chief Strategist, Institutional Desk of XP Investments: “Is Trump inflationary?” Bernal believes he is not and argues that the deglobalization Trump promises by reindustrializing the U.S. will not happen.

Mohamed El-Erian, Chief Economic Advisor at Allianz and former CEO and Chief Investment Officer at PIMCO: “In the next five years, there will be more inflation because we are in a fragmented world.”

Boston, September 2024

Mike W. Roberge, MFS: “The next 30 years will not resemble the last 30. Looking ahead to the next 5 or 10 years, we expect markets to be more challenging, with greater volatility.”

August 2024, Amidst a Mini Stock Market Crash

Cohen Analysis (Argentine Firm):
“In our view, the market is overreacting to events, as economic prospects remain positive, with activity naturally on a soft-landing trajectory. In a week with a ‘light’ calendar of publications, attention will focus on service activity indicators, trade balances, and the earnings season nearing its conclusion.”

April 2024, X Funds Society Investment Summit in Palm Beach

Maria Quinn, Investment Advisory Research Specialist at Vanguard:
“Eighty-four trillion dollars will change hands in the next 20 years,” she stated during her presentation at the Funds Society event. She added, “Financial advisors have the opportunity to address gaps and work on them to ensure families don’t lose money and that new generations listen to them.” Quinn emphasized, “No matter the generation, FAs sell trust.”

Montevideo, Compass Investor Day, August 2024

Brian Doherty, Managing Director and CIO of Wellington Management:
“Deglobalization is a reality, as is the new industrial revolution related to energy, which is an inflationary topic,” he said. Doherty viewed the mini-crash of Monday the 5th as an opportunity to buy and adapt to the “new regime of volatility.”

March 2024, IV Investment Summit of Funds Society in Houston

Scott Edgcomb, Global Product Investment Strategist at MFS:
At the Funds Society event, Edgcomb reviewed the context of U.S. equities. “The largest index values drove overall performance and further increased market concentration,” he commented. He also noted, “The dissociation of the magnificent seven causes dispersion in results.”

Punta del Este, March 2024, LATAM ConsultUs Kick-Off

Benjamin Trombley, Managing Director at Apollo:
“Traditional markets have become a kind of ‘commodity.’ Active management doesn’t outperform indexes, but index-following vehicles (like ETFs) trap you in the market when everything falls. We facilitate corporate financing, which markets no longer do. In the U.S. and globally, this is being done by the private sector, not big banks.”

Montevideo, December 2024

Guillermo Davies, Partner at Buda Partners:
“Manager selection is the most important thing in private markets.”

London/Montevideo, June 2024, Americas Magazine

William López, Head of LatAm & US Offshore at Jupiter AM:
“I believe active management will not survive unless the products are truly differentiating compared to a benchmark index.”

Santiago de Chile, October 2024

Gabriel Ruiz, President of BlackTORO Global Wealth Management:
“The role savings play for a Latin American is not the same as for an American. That’s why Americans are much more willing to take on volatility risk.”

Joanna Castro, Executive Director of Investment Advisory at Credicorp Capital:
“The industry knows it. The next big growth vein is not institutional but individual clients,” she said, referring to the rise of semi-liquid products among affluent clients.

Buenos Aires, March 2024, Americas Magazine

José Noguerol, Co-Founder of BECON IM:
“Firms that distribute funds to institutional clients make transactions, whereas we (in the Wealth Management segment) build relationships of trust.”

November 2024, Impact of Trump’s Election on Brazil

Trump’s reelection led to an immediate 1.3% drop in the Ibovespa, Brazil’s main stock index, which later moderated to a 0.65% loss by Wednesday afternoon.

Despite the initial stock market reaction, the dollar rose 0.5% to 5.78 reais. However, many Brazilians were misled by an incorrect exchange rate on Google, which showed the dollar climbing to 6.19 reais. This would have been a historical high if not for a detail: Google, relying on Morningstar data, displayed incorrect information for several hours before correcting it.

Mexico City, October 2024, 50th Anniversary of Vector Casa de Bolsa

Alan Stoga, President of the Tällberg Foundation and Chairman of Zemi, on renegotiating the U.S.-Mexico trade agreement:
“Trump can be managed. How do you do it? Understand that he is fundamentally transactional. He sees himself as the best negotiator in the world. Therefore, the Mexican side of the conversation must figure out what he wants, what you’re willing to give, how you’ll structure the negotiation, and where you’ll take it.”

Montevideo, November 2024, Women in Finance by LATAM ConsultUs

Mariela Gesto, Financial Advisor at Atlantis Global Investors:
“I love this job; I’ll never retire, even though it took many years of work, arriving earlier and leaving later than the men.”

Luisa Pollio, part of the historic Polio brokerage firm, now part of Nobilis:
“Working in the financial industry cost me blood, sweat, and tears because my family didn’t want me in it. I was the only woman. I succeeded by being persistent. At first, I was sent for coffee; one day, they let me attend a trading session. It was pure adrenaline. Over the years, we’ve gone from ink and pens to artificial intelligence.”