Mercury Insurance has paid out $80M to wildfire victims, has ‘sufficient liquidity’

Mercury General Corp., parent of Mercury Insurance, says it has paid about $80 million in claims so far to victims of the Southern California Wildfires, and has "sufficient liquidity" to survive the disaster.

Most of the affected areas are closed due to ongoing hazardous conditions. Mercury has "received many claims and is using aerial images to assist in determining whether properties are total losses," the insurer said in a news release Monday. "Claims continue to be reported, and Mercury has mobilized our catastrophe loss team, assisting our customers with their claims and replacement housing."

Mercury has paid $80 million to policyholders primarily for living expenses and housing contents, and has started to pay out dwelling claims at the Coverage A limit for verified total losses, the release said. The company "has sufficient liquidity to meet the increased levels of payments."

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 as its own catastrophic event by the Property Claims Service, a unit of the Insurance Services Office, each event can be considered a separate occurrence. In the case of the Palisades and Eaton wildfires, the PCS has designated each as a separate event, the release explained.

Mercury said it has not yet determined if it will consider the wildfires as two separate events, a decision it will make as more information becomes available to the company.

Under a two-event scenario, the company may elect to use reinsurance limits of up to $1,290 million for the first event and reinstated limits up to $1,238 million for the second event. In this scenario, the company would be responsible for the first and second event retentions of $150 million each, and up to a $101 million reinstatement premium for total retention and reinstatement premiums of $401 million, the release said.

In addition, the company would have co-participation up to $52 million for losses in excess of $650 million on the second event.

Mercury may seek to acquire additional reinsurance if reinstated limits are used by the second event, for the stub period ending on June 30, 2025, the expiration date of the current contract, the release said.