Insurer Mercury General Corporation has said that it expects the continued wildfires in Los Angeles, California will lead to losses for the corporate that can exceed its reinsurance retention of $150 million.

It would be a while until Mercury has an estimate for its ultimate losses from the continued wildfire event, the corporate said today.

But, “Based on information available so far, we expect the losses to exceed our reinsurance retention level of $150 million,” the insurer said.

Mercury said that its reinsurance program provides for $1.29 billion of coverage limits on a per-occurrence basis after covered catastrophe losses exceed that retention level.

The reinsurance program also covers any assessments from the California FAIR plan and Mercury said that, if losses find yourself being reinsured, this system calls for reinstatements of limits to cover future loss events.

Should the complete $1.29 billion of reinsurance limits be utilised, then the overall reinstatement premium payable by Mercury could be $101 million, the insurer explained.

Recall that Mercury has been a beneficiary to numerous the Randolph Re series of personal catastrophe bonds.

The most recent of those, issued in July 2024, was a $45.5 million privately placed transaction, that gives Mercury collateralized reinsurance against wildfire losses in California, we understand.

We have no idea what level that non-public cat bond sits at in Mercury’s reinsurance tower, so it’s inconceivable to inform at this stage whether it could face risk of being triggered.

Nevertheless it is a rare per-occurrence California wildfire only catastrophe bond, so will likely be an arrangement considered at some risk, until Mercury’s ultimate net losses from these fires becomes clearer.

Also read:

– LA fires: “Considerable attachment erosion” likely for some aggregate cat bonds – Steiger, Icosa.

– LA wildfires: Over 10k structures destroyed. Insured losses as much as ~$20bn, economic $150bn.

– LA wildfire losses unlikely to significantly affect cat bond market: Twelve Capital.

– LA wildfires unlikely to cause meaningful catastrophe bond impact: Plenum Investments.

– JP Morgan analysts double LA wildfire insurance loss estimate to ~$20bn.

– LA wildfires: Analysts put insured losses in $6bn – $13bn range. Economic loss said $52bn+.

– LA wildfires bring aggregate cat bond attachment erosion into focus: Icosa Investments.