Will Berkshire Hathaway report >$5B in catastrophe losses from California wildfires in any 2026 reporting period?

The $5B threshold requires approximately 4.5x the H1 2025 California wildfire losses of $1.1B. The Black Swan Beacon assigned 20-30% probability to a California megafire event, but even a megafire does not guarantee >$5B in losses to Berkshire specifically -- it depends on retained vs. ceded exposure, which the committee flagged as a data gap. The monitoring trigger specifies $8-12B as the scenario range, suggesting the committee judged a megafire would produce losses in that range. Adjusting: P(megafire) ~25% * P(>$5B | megafire) ~60% = ~15%, plus a cumulative multi-fire path of ~3-5%, yields ~18-20%.

The committee's 20-30% megafire probability is for any California megafire, not specifically one producing >$5B in Berkshire losses. However, Berkshire's market share in catastrophe reinsurance is substantial -- the Zurich/Chubb joint facility formed within 24 hours demonstrates willingness to write large sums. A true megafire producing $30-50B+ in industry-wide insured losses could plausibly push Berkshire past $5B if their effective market share is 10-15%. The reinsurance exposure gap is the key upside risk to this estimate. The resolution window covers all of 2026 including the full fire season, giving multiple opportunities for threshold-crossing events.

The base rate for a single insurer absorbing >$5B from California wildfires in a single reporting period is historically very low. The $1.1B H1 2025 figure demonstrates material but sub-threshold exposure. The committee identified increasing climate severity trends, but the 4.5x escalation required is extreme. The 'Correlation Trap' at 5-12% captures the compound scenario but this question only asks about insurance losses, not compound effects. Weighting the megafire path at ~25% * ~50% conditional = ~12.5%, plus a small cumulative path of ~3%, yields ~15.5%.

The committee's 20-30% megafire probability is the anchor. Even if a megafire occurs, Berkshire crossing $5B requires substantial retained exposure. H1 2025 was $1.1B from notable but not catastrophic fires. A true megafire could push industry-wide losses to $30-50B+, and Berkshire's share at 10-15% gets to $3-7.5B -- so conditional on megafire, roughly 50-60% chance of crossing $5B. That gives ~25% * 55% = ~14%, plus small cumulative probability. The undisclosed BHRG retention is the swing factor.

The data vintage is 137 days stale from latest fundamentals. While the 2025 LA fires demonstrated California megafire potential, $5B is an enormous threshold for a single company in a single reporting period. Berkshire's willingness to write large sums could increase exposure, but the undisclosed reinsurance retention creates material uncertainty that cuts both ways -- they may also be well-hedged. The reserve adequacy CAM from Deloitte is a yellow flag but does not directly indicate concentrated California exposure. I weight this below the committee's base case.

The 20-30% megafire probability from the Black Swan Beacon is the primary anchor. The conditional probability of >$5B losses depends heavily on BHRG retained exposure, which is a known gap. The reserve adequacy CAM from Deloitte and the industry trend of doubling premiums suggest growing exposure. Homeowner insurance in Nebraska being unprofitable even after premium doubling illustrates the broader industry severity pressure that makes catastrophe thresholds more reachable. The Correlation Trap compound scenario adds tail risk. I estimate slightly above the conditional decomposition base case.

Megafire probability 20-30%. Conditional on megafire, Berkshire >$5B is 40-50% given uncertain retained exposure. Combined: ~10-15%. Plus small cumulative multi-fire path: ~12-17%. The $5B threshold is very high relative to observed H1 2025 losses of $1.1B.

$5B threshold is very high. H1 2025 was $1.1B from non-mega events. Need 4.5x escalation even in a megafire scenario. The undisclosed BHRG exposure is the key unknown but could cut either way. Historical base rate for single-insurer $5B+ wildfire losses is near zero. Even with climate acceleration, this remains a tail event.

Climate trends favor increasing wildfire severity. Resolution window covers full 2026 fire season. Berkshire's dual exposure as insurer and utility owner makes them more vulnerable than typical insurers to California wildfire events. But $5B remains an extreme threshold requiring either a single unprecedented event or cumulative season exceeding historical norms by a wide margin.