AM Best has revised the outlooks for Mercury General Corporation and its subsidiaries to ‘negative’ from ‘stable’, citing uncertainty over wildfire-related losses and future reinsurance costs.
The rating agency affirms Mercury’s long-term issuer credit ratings of ‘bbb’ (Good).
AM Best says the results reflect Mercury’s strong balance sheet, adequate operating performance, neutral business profile, and appropriate enterprise risk management.
However, the outlook shift follows concerns over the insurer’s exposure to the recent California wildfires that began on 7 January 2025, particularly the Palisades and Eaton fires.
Mercury’s estimated gross catastrophe losses range from US$1.6 billion to US$2 billion before accounting for reinsurance, subrogation, and state-backed Fair Access to Insurance Requirements (FAIR) plan assessments.
The company’s reinsurance programme includes catastrophe reinsurance limits of US$1.29 billion per occurrence, with a retention of US$150 million and a reinstatement premium of US$101 million.
AM Best expects Mercury’s capital position to absorb the financial impact of the wildfires but said the outlook will remain negative until the full extent of losses and reinsurance implications are clear.
