Specialty insurers will likely deal with “substantial claims and losses” in the wake of the recent bankruptcy filing for California utility PG&E Corp., whose equipment may have contributed to last fall’s deadly wildfires, A.M. Best said in a Jan. 31 briefing.
The utility filed for Chapter 11 bankruptcy protection on Jan. 29.
A.M. Best said it expects some specialty insurers will face losses due to the bankruptcy, “but the losses will be within their risk appetites, and we do not expect any ratings impact.”
That doesn’t mean those losses will be small.
The ratings agency pointed out that it rates many utility company captives and also a number of specialty insurers that operate in the utility sector. A number of them will take some financial hits, A.M. Best said, through substantial wildfire losses and claims and also claims from professional liability (directors & officers liability ) from PG&E’s bankruptcy filing.
A.M. Best added that the vulnerable specialty insurers participated in a shared risk. PG&E’s general liability insurance related to wildfires for 2018 was estimated at $1.4 billion; to broaden its market reach and increase capacity for risks such as wildfire risk, the company also established a captive insurance company,” A.M. Best said.
Even so, the specialty insurers with exposure to PG&E have sublimits in place that should help limit risk volatility from those exposures. A.M. Best said such policies usually “have well-defined maximum limits on both occurrence and aggregate basis.”
As well, because the affected companies have plenty of capital, A.M. Best said that they may even “be able to absorb multiple losses.”
Source: A.M. Best