It's the middle of hurricane season which means I need to write my annual update on the Florida Hurricane Cat Fund and whether it can survive another year. Even with no storms last year, the outlook is sobering. The only way FHCF can remain viable is if there are no storms for a long time. Of course, if there are no storms for a long time, then the insurers didn't need FHCF cover, so it is quite a paradox! If you need it, FHCF cover may not be there for you. If you don't need it, there is a chance it may be there in the future. That's quite the sales pitch! Today's post is part I of II. Yes, there is so much to cover I had to split it up. https://lnkd.in/gSKW3JMp
Will Dove
8mo
I don't disagree with any of your conclusions but your statement that "every Florida insurer blindly pays their premium to FHCF and assumes they’ll make good if there is a claim" is missing the context that FHCF participation is mandatory so insurers have no ability to opt out.
Peter Bransden
8mo
“(The banks) assume FHCF can raise debt at the same interest rate after a giant loss as before one. This ignores reality.” I agree this is assumption is nuts (unless the implicit guarantee becomes explicit) but to be fair to the banks, FHCF asks them to assume this: “base the scale on the FHCF’s current underlying ratings of Aa3/AA/AA/AA..” (appendix A)
Voice of Insurance Podcast. My connections have hit the maximum, so I have limited ability to make new ones. email mark@thevoiceofinsurance.com.
8moFun read as always! But I do feel a little sorry for the poor old Lloyd's Central Fund somehow getting a mention in the same breath as the FHCF! Lloyd's has to live in the real, commercial, solvent, regulated world and has AA- ratings from Fitch and S&P. I don't think the FHCF is rateable, for all the reasons you detail.