Pacific Gas and Electricity (PG&E), the California electrical utility worse hit by wildfire losses and claims in recent years, has successfully renewed almost $758 million of insurance coverage against future potential liability claims for fires that its infrastructure was deemed to have started.
The costs of the coverage has risen significantly for the utility, as insurance and reinsurance companies continue to push for higher rates for California wildfire exposures since the devastating fires of the last few seasons.
The company has upsized on its insurance purchases at the recent renewals, adding 76% more wildfire liability coverage as it procured almost $758 million.
After a $60 million retention, PG&E’s new wildfire liability insurance consists of $715 million that runs from August 1st 2020 to July 31st 2021 and another $42.5 million in reinsurance from July 1st 2020 through June 30th 2021.
PG&E also renewed liability insurance coverage for non-wildfire events amounting to $700 million, after a $10 million retention, running to July 31st 2021.
The costs of renewing this wildfire and non-wildfire insurance coverage was roughly $749 million for the coming year.
Last year, PG&E had a $430 million liability insurance tower for wildfire events, and a further $1 billion in liability insurance coverage for non-wildfire events.
The prior year’s insurance cost the company roughly $212 million, so significantly less which reflects the demand for higher rates from insurance and reinsurance players backing the towers.
The utility is looking for more protection, saying that it continued to pursue additional insurance coverage for the period to end of July 2021.
On the 2019 Kincade wildfire event, for which transmission equipment owned and operated by Pacific Gas and Electricity (PG&E) has been deemed to be the cause, the utility said that it incurred costs, net of “probable” insurance recoveries, of $206 million during the last quarter.
A recovery under the 2019 wildfire liability insurance tower is anticipated, as the utility said it has “Recorded an insurance receivable for the full amount of the $430 million,” adding that “While the Utility plans to seek recovery of all insured losses, it is unable to predict the ultimate amount and timing of such insurance recoveries.”
As a reminder, PG&E made payments to insurance, reinsurance and other entities holding subrogation claims rights, amounting to an $11 billion settlement related to claims on wildfires from prior years.
These subrogation payments are now set to flow through the market, to the benefit of some reinsurance and ILS capital providers.
The utility also joined the California Wildfire Fund, which had also been in the market for reinsurance but walked away citing unattractive pricing.