Reinsurance covers bulk of Mercury General California wildfire loss
US-based multiple-line insurer Mercury General Corporation will pass on most of the expected $253 million losses from the Camp and Woolsey wildfires in California to reinsurers.
The company estimates that its pre-tax total gross losses, before reinsurance benefits, from the Camp fire in Northern California will be approximately $207 million and the Woolsey fire in Southern California will be approximately $46 million.
At the same time, Mercury General estimates that its pre-tax total loss, net of reinsurance benefits, from these two events will be approximately $37 million. This represents $20 million for the company's initial reinsurance retention for the two catastrophe events, $10 million for each event, approximately $10.5 million company retention from the first layer of reinstated reinsurance limit previously used up, and approximately $6.5 million company retention for the Camp Fire, the company explained.
These loss amounts will be recorded in the fourth quarter of 2018.
Mercury General offers predominantly personal automobile and homeowners’ insurance and is party to a catastrophe reinsurance treaty covering a wide range of perils that is effective through June 30, 2019.
The company noted that it has exhausted the reinstated limit on the first layer ($30 million limit in excess of $10 million retention) of the Treaty, and a second reinstatement is not available under the current terms of the Treaty. Should the $46 million gross loss estimate on the Woolsey Fire increase, the company will have 100 percent reinsurance coverage up to $200 million and 5 percent coverage above $200 million up to $500 million of gross losses. Should the $207 million gross loss estimate on the Camp Fire increase, the company will have 5 percent reinsurance protection up to $500 million of gross losses.
Mercury General 's reinsurers are current on all amounts billed from the Carr Fire that occurred in July 2018 and the major wildfires that occurred in 2017.
Get all the latest re/insurance industry news with our daily newsletter - sign up here.
More of today's news
Tokio Marine, Sompo, MS&AD to remain profitable despite record 2018 nat cat losses
AmTrust gets regulatory approval for $2.7bn go-private deal
