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.