Expert: Calif. Insured Loss May Hit $1.25 Billion

Richard Clinton, president of EQECAT, the large Oakland-based extreme risk consulting firm, said extrapolating from past insured wildfire losses in California, "We think you're talking in the $750 million to $1.25 billion range."

He noted that in 1991, the Oakland Hills fire that burned 3,000 homes had resulted in an insured loss of between $1.7 billion to $2 billion. He also said that the Orange County and Laguna Beach fires in 1993 had burned 1,000 structures for an insured loss of $500 million.

The California Office of Emergency Services at 3 p.m. today said that the number of homes burned had reached 1,935 and the fire had consumed 527,867 acres–an increase of 100,000 acres over yesterday's total.

Sixteen fatalities were listed.

According to the California Association of Realtors, the median price for a home in California is $380,000. Mr. Clinton, who was in San Diego to assess conditions there, said homes in that area are far more expensive.

He said his estimate, which the company is working on "to get better numbers," factors in losses not only for home value, but contents and loss of use as well as some commercial losses, automobiles and business interruption.

Airlines, he noted have been affected by smoke conditions that have cause flight postponements and detours.

Mr. Clinton, who said his firm has been advising insurance companies on fire risks so they can adjust reinsurance, said EQECAT does regular reports on the California wildfire exposure and has found that large-scale blazes occur almost every 10 years.

The current set of fires "certainly is a devastating loss, but not by any stretch a worst case," he said.

The current conditions in San Diego are creating "the worst smoke-filled situation I've ever experienced," he said, comparing the situation with several major fires he has experienced in Los Angeles.

An estimate of the effect on Allstate came from the Citigroup equity research division, which wrote that "unless losses escalate sharply from here (and possibly even if they do), we do not expect them to be sufficient to cause a fourth-quarter 2003 earnings disappointment at Allstate. Our fourth-quarter 2003 estimate for SAFECO incorporates a fire loss assumption," the report added.

Jay Van Rein spokesperson for the California Office of Emergency Services said that fires in San Diego and Santa Barbara have been contained, but that others still going were only 5-25 percent contained. He said officials were hopeful of progress because of a forecast that wind speeds and temperatures will drop.

Bill Mellander, an Allstate spokesperson said the company has not been able to reach damage areas to make an assessment, but that local staff and company CAT specialists have set up tables to help customers at fire refugee shelters that have been set up in Los Angeles and San Diego.

Insurance Services Offices in Jersey City, N.J. said its PCS unit is in a monitoring mode and has no estimates yet.

It's possible that separate fires could be judged as individual events by PCS. ISO's threshold for declaring a catastrophe is $25 million, said spokesperson Dave Dasgupta.