Mercury General updates customers on Southern California wildfire claims

Company assures it has sufficient liquidity to cover claims

Mercury General updates customers on Southern California wildfire claims

Catastrophe & Flood

By Josh Recamara

Mercury General Corporation said it has received a significant number of claims in connection with the Southern California wildfires and is using aerial imagery to assist in assessing potential total losses.

The multiple line insurance company said it has mobilized its catastrophe loss team to support customers with claims and housing replacement.

As of the date of the release, Mercury General said it has paid out $80 million to policyholders, primarily for living expenses and housing contents, and has begun paying dwelling claims for verified total losses at the Coverage A limit. The company has confirmed it has sufficient liquidity to manage the increased payment levels.

Mercury's catastrophe reinsurance treaty allows for the combining of events that occur within a 150-mile radius as a single occurrence. Additionally, if each individual event is classified separately by the Property Claims Service (PCS), a unit of the Insurance Services Office, each event can be treated as a distinct occurrence. For the Palisades and Eaton wildfires, the PCS has classified each fire as a separate event.

The company has not yet decided whether to consider the two fires as separate events. Mercury plans to assess the situation further as more information becomes available, including potential subrogation opportunities.

If the fires are treated as two separate events, the company could use reinsurance limits of up to $1.29 billion for the first event and reinstated limits of up to $1.24 billion for the second event. In this scenario, Mercury would be responsible for retentions of $150 million each for both events, along with a potential reinstatement premium of up to $101 million, bringing total retention and reinstatement premiums to $401 million. The company would also share in excess losses, contributing up to $52 million for losses over $650 million on the second event.

Mercury may seek additional reinsurance coverage if reinstated limits are utilized for the second event, which would apply to the period ending on June 30, 2025, the expiration date of the current contract.

The Palisades and Eaton fires are part of the Southern California wildfires that started on January 7. Cal Fire reported Monday that the Eaton Fire has destroyed or damaged more than 10,000 structures, while the Palisades fires have destroyed 6,051 structures and damaged 788 structures.

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