As insured loss estimates from the Southern California wildfires pass $1 billion, a ratings agency predicted this could become the costliest catastrophe insured loss event in 2007.
Fitch Ratings added that this could become the costliest wildfire catastrophe insured loss event ever for the property-casualty insurance industry.
Risk Management Solutions said insured losses could be anywhere from $900 million to $1.6 billion–a record loss.
A loss estimate of $1 billion came from EQECAT, which noted that all of the major California brush fires (fires with extents greater than 10,000 acres) have been accompanied by similar wind conditions.
EQECAT said its wildland brushfire model produces an expectation of a $1 billion loss about every 8 years (a cumulative loss level exceeding approximately 12 percent annual probability).
Meanwhile, the Insurance Information Network of California reported that insurers have already registered 1,760 claims from the wildfires sweeping through Southern California.
Despite the catastrophic loss numbers being piled up, however, they are unlikely to impact homeowners rates in the state, said RobertP. Hartwig, president of the Insurance Information Institute.
State Insurance Commissioner Steve Poizner, announcing he is anticipating "an onslaught of severe insurance claims," issued an emergency declaration that allows adjusters from out of state to work on claims.
The National Interagency Fire Center said today that in California it tallied 15 wildfires burning and 414,013 acres being hit by flames.
Candysse Miller, Insurance Information Network executive director, said in a statement that her organization is hearing reports of up to 1,100 homes being claimed by the Southern California firestorms.
She said that using historical data as guideposts, "we know that the current fires will exceed those of the Laguna and the Topanga-Malibu areas of 1993. In Laguna, 441 structures were lost, resulting in $350 million in insured losses; in Topanga-Malibu, 323 structures were destroyed, resulting in $375 million in insurance losses.
She continued, "We're not yet done with these very unpredictable fires, which will clearly cost hundreds of millions of dollars and are likely to reach at least $500 million in insured losses."
Ms. Miller said it is important to remember "the insurance industry has confronted catastrophic fires before, and while the current firestorms are clearly of historic magnitude, the industry not only has the ability to pay these claims but also is already writing checks to fire victims."
Insurers' losses from the fires are unlikely to impact property premium prices in the state, Mr. Hartwig said. "These types of events are pretty much imbedded in insurers' rates." Wildfires, he noted, are factored into the underwriting for California because "they are not infrequent there."
Even in the wake of 2003, when California wildfire losses hit a record $1.1 billion after 4,847 structures were burned, homeowners rates have been falling, Mr. Hartwig said.
He added that Hurricane Katrina, which led to a surge in property rates in coastal areas, was an insured loss 20-times higher than that experienced in California in 2003.
The California p-c market, he said, "is fairly healthy," and the current fire losses are "not likely to disrupt the market."
Mr. Poizner said in a statement that to help with claims, he is "issuing a declaration which will expedite additional insurance adjusters to California to assist survivors of the fire storms with the prompt processing of insurance claims resulting from this catastrophic event."
Concerning policyholders experiencing losses, he said, "For many, the first step on the road to recovery is to cut through the red tape, have their loss documented and processed for a claim. We want to remove any unnecessary delays to the system and make sure we have enough adjusters on the job."
The proclamation by the California Department of Insurance, he said, will allow CDI-licensed insurance adjusters and insurers to use the services of non-CDI licensed adjusters, such as those from out of state, to assist with the processing of the multitude of anticipated insurance claims arising from the fire storms.
The work performed by the non-CDI-licensed adjusters must be under the active direction, control, charge, or management of a CDI-licensed insurer or adjuster, according to the proclamation.
Commissioner Poizner said he was acting according to California Insurance Code, which provides that such use is reasonably necessary in order to adequately respond to the emergency situation.
He last issued such a declaration on Jan. 22 in the face of the extreme California crop freezes. Prior to that, however, the last insurance emergency declaration was issued in November 2003 in response to wildfires in Southern California.
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