Insurers protected from brush fires

NEW YORK -- The Southern California wildfires should not cause major losses for home insurers such as Allstate Corp, Nationwide and State Farm, according to a report by Goldman Sachs analyst Thomas Cholnoky Tuesday.

"Most of the more traditional writers (of home insurance) have explicitly avoided writing any exposures in 'brush' defined areas," Cholnoky said in a research note.

He said that while it was too early to assess insurer losses, it appeared "non-traditional" companies and markets such as London-based Lloyd's might bear the brunt of the losses.

"Given the losses to date, the largely uncontrolled nature of the fire and experience with past events, insured damages from the California wildfires could exceed $500 million," Loretta Worters, a spokeswoman for the Insurance Information Institute (III), said in a statement.

In 2005, Hurricane Katrina cost the insurance industry $41 billion from 1.75 million claims, according to the III.

Asked if they were able to assess the insured damages so far, Northbrook-based Allstate, Nationwide, State Farm and Lloyd's said they could not do so while fires were still raging.

U.S. insurers might be liable for insured damages in places where winds have driven fires from outlying areas, Cholnoky said. He noted the average cost of homes in the affected areas was about $500,000, meaning that every 100 homes lost would generate $50 million in insurance losses.

Seven of the 10 most expensive wildfires in U.S. history, as defined by insurance losses, have occurred in California, according to the Insurance Information Institute, a group that provides industry statistics.

The largest, in Oakland and Alameda Counties in 1991, resulted in more than $2.5 billion in insured damages (in 2006 dollars).