Best’s Briefing: Specialty Insurers’ Exposures to PG&E Bankruptcy Are Within Risk Appetites

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- Specialty companies specifically operating in the utility sector are likely to face substantial claims and losses stemming from the bankruptcy filing by PG&E Corporation, the California utility whose equipment is being investigated as having a potential role in the recent deadly wildfires, according to a new AM Best briefing.

The Best’s Briefing, titled, “Specialty Insurers’ Exposures to PG&E Bankruptcy Are Within Risk Appetites,” states that claims experience likely will encompass direct wildfire damage, as well as directors and officers liability related to the bankruptcy filing. However, specialty insurers that insure PG&E have a limited risk appetite and have sub-limits in place that will help limit the risk of volatility arising from these exposures. In addition, because these companies are well-capitalized, they should be able to absorb the losses. Since the anticipated losses will be within their risk appetites, AM Best does not expect any impact to these insurers’ Credit Ratings.

Specialty insurers play a significant role in providing coverage for utility companies, which they refer to as member companies. These insurers operate as mutuals, with membership available to any utility or member of the energy services industry that meets each insurer’s underwriting standards. A fair number of the electric utility companies also have established wholly owned captive insurance subsidiaries to provide for their primary layer insurance needs, while using the specialty and commercial markets for higher layer protection.

Several of the massive, deadly wildfires of 2017-2018 believed to have been caused by PG&E’s equipment have left it with potential liabilities of approximately $30 billion or more. The company has said that a court-supervised process under Chapter 11 will best enable it to resolve its potential liabilities in an orderly, fair, and expeditious fashion. Still, AM Best expects that the losses and the legal process will be drawn out over a lengthy period.

To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=282493.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

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Alexander Sarfo

Senior Financial Analyst

+1 908 439 2200, ext. 5779

alexander.sarfo@ambest.com

David Blades, CPCU

Associate Director, Industry Research

and Analytics

+1 908 439 2200, ext. 5422

david.blades@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com