Outlook: In regard to major decisions Insurance Face Again F

 

Thursday, Mar 05,2009, 11:25:07 PM   Click:

Outlook: In regard to major decisions Insurance Face Again Florida legislators, regulators Chad Hemenway
Florida began the new year with a loss of $ 224 million up billionaire Warren Buffett. It is a lot of T-bone steak.

Florida could not afford to play the same game Buffett could odds. The State needs to turn to Buffett and fork over hundreds of millions to his Berkshire Hathaway in 2008 in exchange for a promise to purchase Berkshire would be $ 4 billion of bonds if a hurricane hit the Sunshine State. It was not.

Entering 2009, Florida could have to turn around and do exactly the same thing. This will be Florida, elected as the approaches of the legislative session.

On 14 January, Florida, the Senate Committee on Banks and Insurance is scheduled to give a second report which is intended to inform Parliament before the session. The committee's report in early December 2008 on the State of Florida Hurricane Catastrophe Fund is not necessarily good news.

The report shows that Florida is in the same boat in 2009 - with "deficit" painted on the bow. The FHCF has a shortfall of $ 19 billion this year. The legislature in 2007 chose to expand the catastrophe fund to $ 28 million and requires insurers doing business in the state to buy cheaper from the reinsurance fund, but he has no money to cover any losses if the FHCF is operated.

The fund has only about 10.5 billion dollars in reserves. Even the reported reserve estimate includes the assumption that $ 3 billion in bonds may be sold within 12 months, and counting on the sale of the bonds.

There is another option, the legislature will consider a lower fund exposure and make more reinsurance in the private market. Here we have the balance, because in exchange for capacity on the private market, owners can increase the rates.

Reinsurance non-cash cat is more expensive and could be on the rise. Remember that the active hurricane season? Add disasters turmoil in the credit market and get a reinsurance landscape remains very volatile, "says a report by the specialist risk and reinsurance Guy Carpenter & Co. The first half of 2009 will be a waiting game, the company said. Does Florida have the time to wait? Then the means of its residents increases in the rates of homeowners, particularly in the context of these economic conditions?

The new year already saw a group of heads of state, industry officials and consumer advocates - the Study Group of the mission - report on the study of Florida's "last resort" insurer - Citizens of State Property Insurance Corp. Citizens term has become the largest insurer of homes in the state, as legislators have chosen to freeze its rates over the past two years, and allowed residents to find the insurer, if rates were to the private market were 15% higher than those of citizens.

Citizens and the rate fell below the noise level generated. The freeze will be lifted after 2009. To begin with, the working group proposes a revision of average citizens of the state increased 10% in early January 2010. On his way at rates that reflect the real risk, maybe people can make its exit from the competition with the private market and to achieve its new moniker as an insurer of last resort, the group said, which meet again with state officials on January 22.

The industry must also keep an eye on the Insurance Commissioner Kevin McCarty the final decision, due this week on a rate filing by State Farm Florida has requested an increase of 47%. The company can not do business in Florida without the increase, he said, and the interesting thing here is that State Farm Florida buys reinsurance from State Farm Mutual. McCarty already refused the deposit - a decision upheld by the Florida Division of Administrative Hearings.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway @ ambest.com)

Copyright © 2009 hours Best Company, Inc. Florida began the new year with a loss of $ 224 million up billionaire Warren Buffett. It is a lot of T-bone steak.