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09 November 2012
New Jersey
Reporter Jenna Jones

Hurricane Sandy could force captive hands

A.M. Best is contacting rated captive companies that have been affected by Hurricane Sandy to get an indication of the impact of the event.

The ratings firm is concerned that captives that are located in New Jersey, New York, Pennsylvania and Connecticut may have losses, particularly in the energy, manufacturing and housing spaces.

“The capital model that supports the ratings of all companies is tested for one PML (Probable Maximum Loss) of a 1 in a 100 year hurricane event and then stress tested as an ongoing entity after that event. The danger is if the uniqueness of Hurricane Sandy is beyond what the companies anticipated,” said a statement from the firm.

A.M. Best also stressed that, in the case of Hurricane Sandy, there have been talks that the storm may not be treated in insurance contracts as a hurricane. If this is to be the case, “companies would be exposed to losses from hurricane force winds which they thought would in many cases be within a hurricane deductible.”

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