Even if the insurance company issuing a HO policy is not publicly traded, the odds are its reinsurer is. The shareholders of that reinsurer require a substantial rate of return to justify the reinsurer\’s participation in the Florida property insurance marketplace.
We should have a sense of the havoc that inadequate rates and accomodation underwriting wreak, it is often summarized in residual market mechanisms.
Publicly traded reinsurers compete for capital with Google, Yahoo, Microsoft, etc., not just with each other.
Cut the primary insurance company some slack, they do not want high reinsurance costs anymore than consumers do.
For public companies, the \”profits\” flow out in dividends to investors, including pension plans, individuals, etc. If investors can get a 10% rate of return from something else, that\’s where they will go. If investment capital is diverted elsewhere, then where do you think the surplus or reinsurance capital comes from?
If you are sitting on the fiduciary committee of a pension plan, what do you think your PERSONAL liability might be if you deliberately leave your investments in an industry which is frequently subjected to catastrophic loss plus the vagaries of politicized rate setting – at only a 5% rate of return, if you can get as much or more in a less risky investment?
Do you think executives just sit around and say \”gee, let\’s try for a 10% ROE just for the fun of it?\”
And may I add, WHERE ARE ALL THE HURRICANES??? I heard on the news media that this country was supposed to be DEVISTATED by Katrina-like storms (3 Cat 5s) that would destory the Gulf Coast again this year!!!!
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Even if the insurance company issuing a HO policy is not publicly traded, the odds are its reinsurer is. The shareholders of that reinsurer require a substantial rate of return to justify the reinsurer\’s participation in the Florida property insurance marketplace.
We should have a sense of the havoc that inadequate rates and accomodation underwriting wreak, it is often summarized in residual market mechanisms.
Publicly traded reinsurers compete for capital with Google, Yahoo, Microsoft, etc., not just with each other.
Cut the primary insurance company some slack, they do not want high reinsurance costs anymore than consumers do.
So what is wrong with multi-billion dollar companies, in the 1.3+ TRILLION dollar P&C market, making 5-6 percent post tax profit?
rogerpoegc@yahoo.com
So what is wrong with multi-billion dollar companies, in the 1.3+ TRILLION dollar P&C market, making 5-6 percent post tax profit?
At 5% would $61,000,000,000 (BILLION) be OK?
rogerpoegc@yahoo.com
For public companies, the \”profits\” flow out in dividends to investors, including pension plans, individuals, etc. If investors can get a 10% rate of return from something else, that\’s where they will go. If investment capital is diverted elsewhere, then where do you think the surplus or reinsurance capital comes from?
If you are sitting on the fiduciary committee of a pension plan, what do you think your PERSONAL liability might be if you deliberately leave your investments in an industry which is frequently subjected to catastrophic loss plus the vagaries of politicized rate setting – at only a 5% rate of return, if you can get as much or more in a less risky investment?
Do you think executives just sit around and say \”gee, let\’s try for a 10% ROE just for the fun of it?\”
Redistribution of wealth. The utopia of the Communist State.
Thank you Karl, but we\’ve seen the results of that philosphy fall apart even before the wall came down.
And may I add, WHERE ARE ALL THE HURRICANES??? I heard on the news media that this country was supposed to be DEVISTATED by Katrina-like storms (3 Cat 5s) that would destory the Gulf Coast again this year!!!!
Where are the hurricanes?