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Broad swath of excess insurers, reinsurers named in PG&E bankruptcy filing

Broad swath of excess insurers, reinsurers named in PG&E bankruptcy filing

Excess liability insurers and reinsurers from the United States, London and Bermuda markets are among those named in a standard court motion to maintain insurance lodged by Pacific Gas & Electric Co. as part of its filing for bankruptcy protection Tuesday.

“Continuation of the insurance policies is essential to the ongoing operation of the debtors business,” said attorneys for San Francisco-based PG&E in the motion to maintain insurance filed in the U.S. Bankruptcy Court for the Northern District of California.

An application to maintain insurance coverage is standard in a bankruptcy filing and “one of the critical motions that have to be teed up for hearing because the debtor needs to continue his normal business operations immediately and needs approval from the bankruptcy court to do that,” according to Dennis Nolan, a shareholder in the New York office of Anderson Kill P.C. and co-chair of the firm’s bankruptcy group.

“You could have a situation where a catastrophic event occurs that could cripple the company’s ability to reorganize,” said Mr. Nolan. “If something like that happens to PG&E, the financial consequences if they didn’t have insurance that could respond would be catastrophic.”

No fewer than 121 liability and property insurance policies, including 23 excess liability insurance and reinsurance policies that were in place at the time of the November 2018 California wildfires, are listed in PG&E’s motion to maintain insurance.

The list shows that PG&E has a 5-year excess liability policy from Berkshire Hathaway’s National Fire and Marine Insurance Co. with an annual premium of $136.5 million that incepted Aug. 1, 2018, for example. That policy has the highest annual premium of all the excess liability policies identified in the court motion.

New York-based Allied World Assurance Co. also wrote an excess liability insurance policy for PG&E with the next highest annual premium of $35.9 million, the motion shows.

PG&E secured its $200 million catastrophe bond for an annual premium of $26.8 million, and the utility also has a captive via Energy Insurance Services Inc., a unit of Tampa, Florida-based excess insurer Energy Insurance Mutual Ltd. with five policies ranging from $6.8 million to $61.9 million in premiums, the documents show.

The utility also has an excess liability policy costing $22 million from energy industry mutual insurer Associated Electric & Gas Insurance Services Ltd. based in East Rutherford, New Jersey, of which it is a member.

Just because an excess policy has a higher premium may not mean that those insurers offered higher limits to PG&E, according to industry sources.

In this case, it could mean that certain insurers would only provide limited capacity at very high premium returns, the sources said.

“I do think premium would reflect higher limits, but there are other factors that play into it,” said Mr. Nolan. “Available limits is a very large factor, but there are also potential exclusions that the policyholder wouldn’t want in its policies so it would negotiate out those exclusions and consequently pay a higher premium for that.”

As reported earlier, PG&E faces lawsuits from property owners and some insurers alleging that poor upkeep of its transmission lines caused the fires.

Insurers have brought $17 billion of claims against the utility related to property losses from the wildfires, according to PG&E filings. PG&E estimates that its liabilities to insurers and wildfire victims could exceed $30 billion, not including punitive damages.







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