Insurers Brace for Tally From Huge Oakland Fire : Casualty: The disaster follows two catastrophe-filled years in a down cycle for the industry. But most firms will be able to handle the load, experts say.

The fire that seared the hills of Oakland and Berkeley could easily surpass the $265 million in insured losses from last year’s Santa Barbara inferno and probably will help turn 1991 into the second worst year for natural disasters that the insurance industry has ever seen, officials said Monday.

Although this follows two catastrophe-filled years and arrives in the midst of a down cycle for the property-casualty insurance industry, insurers in general will be able to handle the load thanks to great stores of capital, as well as years of experience in managing risk and pushing some of the pain onto other, large companies known as re-insurers.

The Oakland Fire Department has estimated that the blaze, which ravaged ritzy hillside homes valued at up to $2 million, caused $1.5 billion in damages. Insurance industry officials say it is still too early to total the insured losses because many of the burned areas are still closed to both residents and claims adjusters.

But the industry has designated the event an official “catastrophe,” meaning that it caused at least $5 million in insured losses to homes, cars and businesses.

“Within the industry, it is now known as Catastrophe No. 87,” said Gary Kerney, a claims consultant for the American Insurance Services Group, which collects data on disasters for the insurance industry. “It’s quite possible this could surpass the Santa Barbara fire” in losses, he said.

State Farm Insurance Co., which covers 20% to 30% of the homes in the area, expects 4,000 to 5,000 claims totaling between $50 million and $75 million--”and that’s a really preliminary guess-timate,” spokeswoman Marcela Iglesias said. The state’s largest home insurer recorded $36 million in claims in the Santa Barbara fire.

Trying to tally a loss Monday while the fire still burned “is like trying to hit a dart board from across a ballroom floor,” said John Kozero, spokesman for Fireman’s Fund, which covered many homes in the burned area. “This is going to be at least as bad as the Santa Barbara area.”

Hurricane Hugo, the Loma Prieta earthquake and other disasters made 1989 the worst catastrophe year for insurers with losses of $7.64 billion, followed by 1990 losses of just under $3 billion, Kerney said. “I would guess that ’91 is shaping up to be the second worst year,” he said.

But despite well-publicized woes, the industry is well able to take it, analysts said.

“Twenty years ago, when a catastrophe happened everyone would pull in their horns and rates would go up,” said Robert Arvanitis, senior vice president of Conning & Co., an investment firm in Hartford, Conn. “Now interest rates and tax laws do more to drive the cycles. The industry has learned to handle one set of problems, but now it has another.”

Said Jeffrey Byer of Los Angeles-based Farmers Insurance: “As unfortunate and as catastrophic a thing as this is, this is our business. We have to plan for this.”

Alan Shirek, senior vice president and manager of the risk management department in the San Francisco office of Alexander & Alexander, an international insurance brokerage firm, said he doubted that the industry as a whole or the individual companies would be hurt too badly by the Oakland fire-related losses.

The burned homes might have been covered by 20 or 30 major insurers, he said, with each one bearing only a portion of the liability. “And they have the wherewithal to withstand such losses,” Shirek said.

Neither will it affect the availability or the cost of insurance, he said. Although the industry has had rough times of late, he said, “a few pretty bad years haven’t seemed yet to change insurance carriers’ appetites” for writing policies in even risky areas, despite their continuing warnings that soon they may pull back or out of certain areas or even states such as California.

In fact, Shirek believes that few property-casualty insurers, in the light of the Oakland fire and the five-year drought that makes much of Southern California a tinderbox, will even now make an assessment of their potential liabilities to brush fire. “We’re not that smart. I don’t think the drought per se is factored into too many people’s thinking.”

In catastrophes such as brush fires and earthquakes, even insurance companies are insured. They have policies with other, large companies, called re-insurers. In case of a catastrophe, the re-insurance company would be liable for losses above a specified amount, usually in the tens of millions of dollar.

If any part of the industry suffers from the Oakland disaster, it would be these re-insurers, primarily large concerns such as Lloyd’s of London and companies based in Germany and Switzerland, which have been experiencing major losses in the past few years.

Richard Roddis, a professor of law at the University of Washington, Seattle, agrees that it is not likely that the losses sustained in the Oakland fire will show up in higher premiums to consumers or insurers pulling out of the market.

Largest Insured-Loss Fires Date: April 18, 1906 Fire: San Francisco earthquake and fire Estimated loss: When occurred (millions): $350 Estimated loss: In 1988 dollars* (millions): $4,590 Date: Oct. 8, 1871 Fire: Great Chicago Fire Estimated loss: When occurred (millions): 168 Estimated loss: In 1988 dollars* (millions): 1,652 Date: Nov. 9, 1872 Fire: Great Boston Fire Estimated loss: When occurred (millions): 75 Estimated loss: In 1988 dollars* (millions): 738 Date: Feb. 7, 1904 Fire: Baltimore conflagration Estimated loss: When occurred (millions): 50 Estimated loss: In 1988 dollars* (millions): 656 Date: Feb. 9, 1942 Fire: S.S. Normandie oceanliner Estimated loss: When occurred (millions): 53 Estimated loss: In 1988 dollars* (millions): 384 Date: April 16, 1947 Fire: S.S. Grand and Monsanto Chemical Co. Estimated loss: When occurred (millions): 67 Estimated loss: In 1988 dollars* (millions): 355 Date: May 5, 1988 Fire: Petroleum refinery, Norco, La. Estimated loss: When occurred (millions): 330 Estimated loss: In 1988 dollars* (millions): 330 Date: Dec. 16, 1835 Fire: Great New York Fire of 1835 Estimated loss: When occurred (millions): 26 Estimated loss: In 1988 dollars* (millions): 297 Date: Oct. 12, 1918 Fire: Forest fires in northern Minnesota Estimated loss: When occurred (millions): 35 Estimated loss: In 1988 dollars* (millions): 274 Date: Jan. 27, 1967 Fire: Apollo spacecraft cabin fire, Cape Canaveral, Fla. Estimated loss: When occurred (millions): 75 Estimated loss: In 1988 dollars* (millions): 265 Date: June 27, 1990 Fire: Santa Barbara fire Estimated loss: When occurred (millions): 265** Estimated loss: In 1988 dollars* (millions): -- Figures are for total claims paid by insurance companies. *Adjustment to 1988 dollars is done using the consumer price index, including the Census Bureau’s estimates of the index for historical times. The list is limited to fires in the United States for which some reliable dollar-loss estimate exists. **1990 dollars Source: National Fire Protection Assn. RELATED STORIES: PART A