The last thing insurers expected when wildfires raged in Southern California was to see their already battered reputations as masters of disasters going up in flames. Yet that is exactly what threatened to happen as it was revealed that many of the homes destroyed in the October catastrophe were in fact underinsured.

As of late November, a survey by the Insurance Information Network of California reported total insured losses from the fires of some $1.6 billion, with at least 22,700 claims confirmed.

If that total holds, it would make this the second-worst U.S. wildfire for carriers, topped only by the October 1991 fires in the Oakland, Calif. area, which produced losses of $1.7 billion–coming out to over $2.4 billion in 2005 dollars, according to the Insurance Information Institute's "2007 Fact Book."

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