Fitch Warns of Negative Credit Effects on Reinsurance from California Wildfires


The “downside credit risks” from the California wildfires are the most pronounced for investor-owned utilities, which could face large liabilities if IOU equipment is found to have ignited the fires.

And negative credit implications could emerge for the reinsurance industry and the U.S. public finance sector, given the potential for a state-wide economic slowdown, damaged infrastructure and associated environmental issues, according to a report from Fitch Ratings released on Wednesday.
The public utility sector is directly exposed to the risk of forest fires directly exposed to the risk of Pacific Gas and Electricity (PG & E: BBB- / RWN) and Southern California Edison (BBB + / Stabil), due to potential major debts arising from forest fires earlier this year. has experienced a decline. Fitch says.
Kin The increasing frequency of wildfires and the magnitude of potential exposure, coupled with an unclear recovery path, significantly increases the business risk for California-based electrical installations, Derecelendirme the rating agency said.

This week’s industry data provider, CoreLogic, reported that total losses from forest fires in North and Southern California could reach $ 19 billion from $ 15 billion.

A report by PG & E with regulators on Tuesday revealed that during a wind storm, California’s most deadly wild fire was a PG & E Corp. the power line broke out, the company was following the weather closely, warned customers could close. The electricity in the area was cut off and finally the agreed conditions were not bad enough.

Fitch estimates that the financial risk for natural fires in 2017 could be around $ 15 billion, if PG & E finds that PG and E equipment are available for the 2017 Tubbs and 2018 Camp forest fires. The PG & E stock lost more than half of its value and the spreads expanded significantly.

A new data analysis by BuildFax released on Wednesday shows that the construction of Butte County’s properties, where the Campfire was burned, increased by 8.57% compared to January-October 2017.
In the BuildFax analysis, he explains, analiz This shows that carriers cannot accurately assess their actual damage in the books of forest fires.

The Fitch report shows that credit practices for other US company sectors such as homebuilding, oil and gas, metals and mining, transportation, health, retail and agriculture should be minimal.

“The insurance will cover losses with operational failures that may be partially temporary and not so long as to negatively affect individual credit profiles.” ”In addition, many publishers, including those mentioned above, have been diversified by accommodation, entertainment, media and entertainment, either geographically or by operating characteristics.“

According to Fitch, the recent fires in California indicate a loss of over two years for a major fire fire for reinsurers, as the industry suffered $ 11.5 billion of insured losses in 2017.

Prior to the fires of this year, California forest fires in July 2018 resulted in $ 845 million of direct insured damage.

Iyor Insured losses are expected to remain within the expected ranges of the insurance sector, while the risk of catastrophe is converted to prime, aralık Fitch said. Erm Furthermore, insurance companies exposed to California forest fires are often larger, larger-capital national carriers with high financial strength scores as a group. “

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