In an unusual move Bermuda-based Ace Ltd. issued a statement revealing a potential loss exposure of $140 million as a result of the credit crisis which has hit Southern California Edison and Pacific Gas & Electric Co.
“ACE felt it appropriate to disclose the amount of aggregate insurance exposure of its financial guaranty subsidiary ACE Financial Services Inc.(‘AFS’).” The insurer detailed the loss potential as follows: “$8 million in bond reinsurance assumed from primary insurers and $30 million in senior unsecured exposure assumed through credit default swaps on SoCalEd, and $6 million in bond reinsurance and $95 million in senior unsecured exposure through credit default swaps on PG&E.”.
ACE expressed optimism that the full $140 million loss would not be realized, and would be mitigated by its financial reserves, tax loss credits and at least a partial recovery of the principal amounts.
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