"We are all affected by catastrophies, even if we are not in affected areas", explained Mississippi Windstorm Association vice chair David Treutel as the costs of reinsurance impacts all who buy insurance. Dave goes on to explain the many ways events here on the Mississippi coast have changed the insurance equation in far away places like Rhode Island and how this issue literally impacts everyone in the country.
Wednesday, January 2, 2008
Wind Pool Board Member David Treutel on Multiperil Insurance
Subscribe to:
Post Comments (Atom)
4 comments:
At least temporarily the cost of re-insurance after Katrina-Rita drove up the price of insurance in Europe. WSJ reported that German insurance customers were a little annoyed to see their bills going up because of events in the US.
It is not a very transparent market but from what you can tell from the outside the re-insurance market has somewhat recovered.
One sign of the recovery:
James River Group a small holding company, based out of Chapel Hill- NC, and specializing in re-insurance was bought by Franklin Holding Ltd.
http://preview.tinyurl.com/2apcgs
Welcome to the Insurance forum and thanks you for the insight Russell. I notice Franklin is also Bermuda based which seems to be the fashion with Reinsuarnce companies these days.
I've taken the liberty of un-previewing your tinyurl.
http://www.tinyurl.com/2apcgs
Given the profits concerns like RenRE (RNR) have made since 2004 I'm not certain there ever was a downturn in reinsurance from which recovery was needed.
http://tinyurl.com/2hfpoa
Scroll way down to page F-6.
A number of them did take heavy hits, and the big hurricane season the year prior did not help. In fact James River had just gone public at the time of Katrina and took an immediate hit. However, the rates have gone up enough to make it look like a good business again.
But in the long run it's a fools game. There is absolutely no way to accurately model most of these disasters. If your a business manager willing to roll the dice with somebody else's money, or if your so old that the probability of devastating setbacks in your lifetime are exceedingly small (Buffet) then it is a great game to play.
But eventually it gets competitive again, rates start going down, and they get clobbered again.
There is no great answers as to how to protect against disasters the size of Katrina. Better Federal response would be a start, but LA and MS are learning what NC learned earlier: the Federal response (even prior to Bush) is not all its cracked up to be.
One way to get consumers better rates is to eliminate these various state wind pools in favor of a national pool. A larger premium base could result in better reinsurance rates due to the size of the group. Reinsurers are fighting federal solutions like HR3121 tooth and nail though as it appears they'd rather deal piece meal state by state than with one big customer.
HR3121 cuts reinsurers out completely which may be a better solution given the lack of transparency and their recalcitrance to contribute to the national insurance discussion. It would be better if they were at the table but so far a "cram down" solution has been our only option.
Post a Comment