At least a dozen major wildfires threatened thousands of homes in Southern California, forcing the evacuation of 500,000 residents. Fears mounted that the infernos, which have already scorched almost 300,000 acres, could become the most expensive fire in California history.

"I think the insurance liability could exceed $2 billion when everything is said and done," said Robert Klein, Director of the Center for Risk Management and Insurance Research at Georgia State University. "This could be the biggest loss since Katrina."

Jason Kirchner, the chief spokesman for the U.S. government's response to the disaster concurred. In a telephone interview withe Portfolio.com, he said that if the damage is "anything like what we saw during the San Diego fires of 2003," then the potential insurance industry liability could be massive.

"We're talking in the billions of dollars," Kirchner said. "We have a vast amount of fire in Southern California."

Insurance companies facing potential settlements include Allstate, State Farm, American International Group, Chubb, and scores of smaller insurance and reinsurance companies. A.I.G. has sought to protect its wealthiest California clients by preemptively spraying fire retardant around their homes.

Because there are so many major blazes raging at once, authorities have instituted a "unified command" protocol reserved for only the most serious emergencies, Kirchner said, adding that the government's focus right now is on assessing fire conditions and deploying resources.

Industry experts warned that more destruction could be forthcoming.

"Over 900 properties have been destroyed and thousands more remain threatened," said Neena Saith, a catastrophe-response analyst at insurance consultancy Risk Management Solutions. "The Witch fire in San Diego County has caused the most destruction so far. But it is the Canyon fire that many insurers will be keeping a close eye on, because Malibu is a million-dollar area, and if the fires reach that area, there is the potential for major losses."

Malibu is home to many wealthy Hollywood figures. Mel Gibson and Kelsey Grammer were among those forced to flee from the flames.

Nearly 1,000 homes, businesses, and other structures had been destroyed as of Tuesday, the Los Angeles Times reported, prompting fears that the cost of the disaster could reach several billion dollars, surpassing the deadly San Diego "Cedar" fire of 2003.

As the fires raged out of control Tuesday, insurance industry analysts struggled to estimate the potential losses.

"We don't have any numbers yet," Insurance Information Institute vice president Loretta Worters told Portfolio.com. "Homes are still burning. The biggest losses could come if the fires reach the McMansions in Malibu."

John Wood, a Smokejumper captain based in Redding, California, said that unusually strong winds had exacerbated the flames.

"The Santa Ana winds have come through and created a very dangerous situation," the 40-year-old firefighter said in a brief phone interview.

Initial reports from first responders battling the blaze were ominous.

"It was like Armageddon. It looked like the end of the world," Mitch Mendler, a San Diego firefighter, told the Associated Press as he and his crew refilled their fire truck with water from a hydrant near a local mall, before heading back into the fire.

The disaster will be a key test of state and federal disaster response two years after Hurricane Katrina.

According to the L.A. Times, the costliest fires in California history are the 1991 Oakland Hills fire ($2.5 billion), the 2003 San Diego fire ($1.1 billion), the 2003 San Bernardino "Old" fire ($1 billion), and the 1993 fires in Los Angeles and Oakland, which together cost $1 billion.

Bloomberg News reported that at least six homes were destroyed in Rancho Santa Fe, a residential community where the average sale price is $2.5 million. Last year, Forbes magazine ranked Rancho Santa Fe as the second priciest Zip code in the U.S.

But with no respite from the gale force Santa Ana winds expected until Tuesday evening—some gusts reached 85 m.p.h. on Monday—fire crews appeared overwhelmed by the multiple infernos.

None of the biggest fires—including Witch, Harris, Ranch, Canyon, Buckweed, and Magic—were reported to be more than 30 percent contained as of Tuesday. Several were reported to be expanding and merging.

The catastrophic Witch fire—which has burned 145,000 acres and destroyed at least 500 homes and 100 commercial establishments—was completely uncontained on Tuesday afternoon, according to multiple reports.

Larry Himmel, a reporter for San Diego's Channel 8, provided an astonishing dispatch of the damage while standing in front of his house as it burned to the ground.

"This was a living hell coming over the hill, and this is what I come home to today," an emotional Himmel reported.

In an indication of the severity of the emergency, all San Diego schools were closed, Hewlett-Packard evacuated employees from its large office near Escondido, the San Diego Chargers moved practice to Arizona from Qualcomm Stadium, which is being used as an evacuation center, and the Navy asked only "essential personnel" to report to work, Bloomberg reported.

California Governor Arnold Schwarzenegger called the crisis "a tragic time for California," and declared a state of emergency in seven counties.

Late Monday, Schwarzenegger announced that federal help was on the way, in the form of six C-130 military transport aircraft capable of dropping up to 3,000 gallons of water or flame retardant at a time.

State officials implored citizens to avoid unnecessary cell phone and 911 calls and pleaded for assistance from fire departments in California's neighboring states.

Two Google Maps features depicted the scope of the emergency. Multiple Red Cross centers and other evacuation sites were reported to be at capacity, and sections of Interstate 5, Interstate 15, and the Pacific Coast Highway were reported closed.

Schwarzenegger called up 1,500 California National Guard troops to help battle the blaze, after earlier deploying soldiers from the Mexican border—where they were guarding against illegal immigrants. More than 20,000 California National Guard soldiers and airmen have been deployed to Afghanistan and Iraq since 9/11.

As fire crews battled the infernos, fewer than 100 firefighters were left to protect San Diego, a 400-square-mile city, said John Langford, a spokesman for San Diego Fire and Rescue.

More than 2,300 inmates from California state prisons were enlisted to aid state and local firefighters.