
Insurer Mercury General Corporation has said that it expects the ongoing wildfires in Los Angeles, California will result in losses for the company that will exceed its reinsurance retention of $150 million.It will be some time until Mercury has an estimate for its ultimate losses from the ongoing wildfire event, the company said today.But, “Based on information available to date, 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 end up being reinsured, the program calls for reinstatements of limits to cover future loss events.Should the full $1.29 billion of reinsurance limits be utilised, then the total reinstatement premium payable by Mercury would be $101 million, the insurer explained.Recall that Mercury has been a beneficiary to a number of the of private catastrophe bonds.
, that provides Mercury collateralized reinsurance against wildfire losses in California, we understand.We do not know what level that private cat bond sits at in Mercury’s reinsurance tower, so it’s impossible to tell at this stage whether it could face risk of being triggered.But 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.
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Publisher: Artemis