Wildfire

Wildfire loss ‘serves as a strong reminder not to unwind hard-fought for rates and terms’, the executive said.

Wildfire is rarely singled out as an exposure that can shift portfolio outcomes.

The insurer disclosed the estimates as it seeks emergency rate hikes from regulators.

Ultimate losses from the Palisades, Eaton and Hurst fires are estimated at $4bn.

The LA-based firm estimated gross cat losses in the range of $1.6bn-$2bn.

The carrier has been reducing its presence in the state since 2007.

The carrier has around $2.5bn-$4bn of reinsurance cover specifically for California risk.

Fitch said 1Q wildfire losses could add 6% to 10% to Mercury’s CoR.

The anticipated portion ceded to reinsurance may reach the mid-to-high single-digit billions, it added.

This will be the most expensive fire in the state’s history, it said.

Experts agreed that investment in understanding wildfire risk had come a long way in recent years.

Large carriers with geographic spread across the continental US will have the capital and reinsurance coverage to absorb losses related to the wildfires, according to AM Best.