I see a couple of major problems with this idea. First, the pools probably will be set up a a peril specific basis; i.e., hurricane/flood, earthquake, etc. It seeks to me that the only states voluntarily participating in a hurrican/flood pool will likely be those with huge, unmanaged exposures–i.e., LA, FL, AL, MS and perhaps GA and NC. Likewise for earthquake (CA, HI,..). Why would any state with a controlled exposure choose to participate.
The second issue is that a “pooling” of similar exposures in a concentrated area does little to spread or diversify the risk since in most cases, most will suffer at the same time. This is kind of like health insurance–more insureds just mean more losses.
The last issue is that of capability. I seriously doubt that states currently need federal approval to form a multi-state pool for cat risks. It probably does, however, require enabling legislation at the state level to permit that state to participate. Once enough states “permit” themselves to participate and agree to participate, any CPCU worth his/her designation should be albe to write a reciprocal risk sharing agreement for the risk. Again, the real problems are whether or not you have really diversified the risk and whether or not you can actually get affordable re-insurance.
Lastly, I agree that I don’t wnat my state to be forced to participate in a pool like this.
I seem to recall that in the definition of insurance spreading the risks is an important component. With all of the Natural Disasters occuring yearly (i.e.
Floods, Fires, Earthquakes, Tornadoes, Down Bursts, Straight Line winds, NorEasterns (?spelling), Hurricanes, Drought, and etc., it seems to me that every state is effected. Also, keep in mind that higher rates= higher cost of living,which eventually is translated into higher prices for consumer goods.
It’s a vicious cycle. And if insurance
premiums keep getting higher, and the deductibles increasing to ridiculous amounts, our customers are going to reach a point where they refuse to give up that much of their income for a possible loss.
The industry is going to price themselves out of business in some areas. We need a stabalization factor. The insurance industry needs to find ways to offset the costs. At least this bill has openned a dialog on change and solutions.
Why do you suppose the BIG I thinks it will work? For those that are put off by the authors of the bill maybe if McCain & Dole had been smart enough to write and sponsor this it would be more acceptable. It seems that everyone is focused on ‘Canes and coastal flooding. Flooding is a cat disaster in many inland states. Ice storms like the one in Okla this year and the fire storms in Ca. are just examples of other cats’. We are all affected and when some companies pull out of an area to avoid risk something has to be done. If all the ins companies pulled out of the coastal areas would it make more sense if 150million folks moved to Kansas?
The Big I probably doesn’t really think it will work as it is advertised. What the Big I likes about it probably it that it virtually guarantees that insurance will be easily available and easy to sell. It’s all about the market, sales and commissions!
As for inland floods, etc., again, I say that, unless the pools are peril-specific, you probably won’t get a lot of voluntary takers. And the takers will not be really diversifying the risk.
SouthernBelle is right. Something has to be done one way or another. She is also right in saying that eventually the premiums will be so high that people will start making the choice of insurance or none.
I don’t agree that any of the States be forced to participate, however if a State does not participate they also cannot ask for the help when they have cat losses and insurance companies stop writing there also.
The risk needs to be spread out, the best way to do that is still very unclear. It does need to happen sooner, rather than later. As the cost of building materials, labor, property values, etc increase the cat’s will be bigger and bigger. Insurance companies are in it to make money, just like the rest of us. If they can’t raise rates to mitigate the losses they will leave States. And the choices will become smaller and smaller.
When he summed it up…..:The fact is, the coastal residents are trying to leverage the country to pay their way out of an insurance pricing crisis largely of their own making.” This is what my cohorts in legal have been saying all along; consider that companies, like ours, have been paying assessments for Florida exposure even though we don’t even write homeowners, because the politicos in Tallahassee find biting the bullet is too much to ask of Florida homeowners, who want something (wind, hurricane coverage) for nothing. this program is nothing but an entitlement which benefits too few at the expense of the many, NO MATTER how you slice it!
Nebraskan,
I’m quite aware that the world is subject to quite a few things that are natural disasters, BUT Nebraska is generally not subject to Volcanos, Tsunamis, Earthquakes (correct me if I’m wrong), Hurricanes. I am also of the belief that Lahars, Avalanches, Lightning strikes, and tornados are too localized to be considered a Major disaster.
Let me ask that question slightly differently. What Major natural disasters (think 100s of millions of dollars damage done) is Nebraska subject to that is covered by standard HO & BOP policies (excluding flood, as it is subsidized by the Federal government)? And are these disasters subject to exclusion by endorsement by the insurance companies frequently enough that a Cat Pool has been set up by the State of Nebraska to cover said peril?
Also I asked DO they have a wind pool (or anything similar). If they do please feel free to correct me.
The reason why I ask is that in a fair number of coastal states, Wind/Hail coverage is an excluded peril by a majority of HO companies for coastal territories. In North Carolina for instance it is quite difficult to find a standard carrier east of I-95 that does cover wind at a reasonable price. As a result two policies are frequently written; A primary Hazard policy (under an HO or DP policy form), and a secondary Wind/Hail policy written thru the North Carolina Insurance Underwriting Association (aka the NCIUA, or Beach plan).
As well, If you take offense at me asking that the discussion be polite (I was not the one calling Clinton a “bimbo”, nor insinuating that someone lives in a cave), or have an issue with what I have said; please make your counterpoint with some dignity and not by trying to insult my intelligence.
I suppose I had a knee-jerk reaction, but quite truthfully, the ONLY (in my opinion) natural disaster East Coasters deal with annually are hurricanes. and well, i lived in japan for a year and a half and lived thru some of the worst typhoons (same as a hurricaine but generated out of the south pacific as opposed to the carribbean) they have seen since world war II. and truth be told…i’ll take a hurricane/typhoon any day of the week over a tornado.
Also, tornados have been known to generate all over the world.
from an insurance perspective, i won’t argue with you because i will openly admit, i am not as knowledgeable as you. BUT PLEASE, do not sit here and tell me and others that the devastation of a tornado which ANNUALLY destroys homes and towns is not as significant as a hurricane. At least with a hurricane, you know it’s coming, you know you can leave and potentially save your life and some of your belongings. Tornado victims aren’t afforded that right.
I’m so tired of people on the coast playing the victim card, and frankly you do. i don’t care if you want to live there, that’s your choice, but do not ever state that you are subject to a worse fate because of it. that’s all.
You do have a point on the tornados, I find it most unfortunate that middle America sees more in a month then most countries do in a year. I also agree that you do not need to help subsidize coastal hurricane risks… unless you move into a coastal region ;)
I do believe though, that the Cat risk pool is a good idea for disaster prone areas such as the Southeastern states and California (I include California in this due to earthquakes). However, I am of the belief that your state would not be very likely enter into a National Cat pool, nor do I think it is a good idea for you to do so, as your overall exposure to such major losses is minimal.
On the other hand, I also see the point of some of the others here that the Federal Loan/bailout of the individual state’s Cat pools is not a good idea.
While a tornado may be every bit as devastating as a hurricane to those affected by it, from an insurer’s standpoint it is a far easier event to deal with.
From any given incident, there are usually fewer claimants after a tornado than after a hurricane. Also, the damage is more clear-cut — no Wind vs. Water arguments. It’s easier to adjust and settle the claim.
Also, the more regular occurrence of tornados means that it is FAR easier to determine an appropriate rate for coverage in Tornado Alley than it is for the Gulf Coast.
Hailstorms in Nebraska give insurers more headaches than tornados.
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I see a couple of major problems with this idea. First, the pools probably will be set up a a peril specific basis; i.e., hurricane/flood, earthquake, etc. It seeks to me that the only states voluntarily participating in a hurrican/flood pool will likely be those with huge, unmanaged exposures–i.e., LA, FL, AL, MS and perhaps GA and NC. Likewise for earthquake (CA, HI,..). Why would any state with a controlled exposure choose to participate.
The second issue is that a “pooling” of similar exposures in a concentrated area does little to spread or diversify the risk since in most cases, most will suffer at the same time. This is kind of like health insurance–more insureds just mean more losses.
The last issue is that of capability. I seriously doubt that states currently need federal approval to form a multi-state pool for cat risks. It probably does, however, require enabling legislation at the state level to permit that state to participate. Once enough states “permit” themselves to participate and agree to participate, any CPCU worth his/her designation should be albe to write a reciprocal risk sharing agreement for the risk. Again, the real problems are whether or not you have really diversified the risk and whether or not you can actually get affordable re-insurance.
Lastly, I agree that I don’t wnat my state to be forced to participate in a pool like this.
I seem to recall that in the definition of insurance spreading the risks is an important component. With all of the Natural Disasters occuring yearly (i.e.
Floods, Fires, Earthquakes, Tornadoes, Down Bursts, Straight Line winds, NorEasterns (?spelling), Hurricanes, Drought, and etc., it seems to me that every state is effected. Also, keep in mind that higher rates= higher cost of living,which eventually is translated into higher prices for consumer goods.
It’s a vicious cycle. And if insurance
premiums keep getting higher, and the deductibles increasing to ridiculous amounts, our customers are going to reach a point where they refuse to give up that much of their income for a possible loss.
The industry is going to price themselves out of business in some areas. We need a stabalization factor. The insurance industry needs to find ways to offset the costs. At least this bill has openned a dialog on change and solutions.
Why do you suppose the BIG I thinks it will work? For those that are put off by the authors of the bill maybe if McCain & Dole had been smart enough to write and sponsor this it would be more acceptable. It seems that everyone is focused on ‘Canes and coastal flooding. Flooding is a cat disaster in many inland states. Ice storms like the one in Okla this year and the fire storms in Ca. are just examples of other cats’. We are all affected and when some companies pull out of an area to avoid risk something has to be done. If all the ins companies pulled out of the coastal areas would it make more sense if 150million folks moved to Kansas?
The Big I probably doesn’t really think it will work as it is advertised. What the Big I likes about it probably it that it virtually guarantees that insurance will be easily available and easy to sell. It’s all about the market, sales and commissions!
As for inland floods, etc., again, I say that, unless the pools are peril-specific, you probably won’t get a lot of voluntary takers. And the takers will not be really diversifying the risk.
SouthernBelle is right. Something has to be done one way or another. She is also right in saying that eventually the premiums will be so high that people will start making the choice of insurance or none.
I don’t agree that any of the States be forced to participate, however if a State does not participate they also cannot ask for the help when they have cat losses and insurance companies stop writing there also.
The risk needs to be spread out, the best way to do that is still very unclear. It does need to happen sooner, rather than later. As the cost of building materials, labor, property values, etc increase the cat’s will be bigger and bigger. Insurance companies are in it to make money, just like the rest of us. If they can’t raise rates to mitigate the losses they will leave States. And the choices will become smaller and smaller.
When he summed it up…..:The fact is, the coastal residents are trying to leverage the country to pay their way out of an insurance pricing crisis largely of their own making.” This is what my cohorts in legal have been saying all along; consider that companies, like ours, have been paying assessments for Florida exposure even though we don’t even write homeowners, because the politicos in Tallahassee find biting the bullet is too much to ask of Florida homeowners, who want something (wind, hurricane coverage) for nothing. this program is nothing but an entitlement which benefits too few at the expense of the many, NO MATTER how you slice it!
Nebraskan,
I’m quite aware that the world is subject to quite a few things that are natural disasters, BUT Nebraska is generally not subject to Volcanos, Tsunamis, Earthquakes (correct me if I’m wrong), Hurricanes. I am also of the belief that Lahars, Avalanches, Lightning strikes, and tornados are too localized to be considered a Major disaster.
Let me ask that question slightly differently. What Major natural disasters (think 100s of millions of dollars damage done) is Nebraska subject to that is covered by standard HO & BOP policies (excluding flood, as it is subsidized by the Federal government)? And are these disasters subject to exclusion by endorsement by the insurance companies frequently enough that a Cat Pool has been set up by the State of Nebraska to cover said peril?
Also I asked DO they have a wind pool (or anything similar). If they do please feel free to correct me.
The reason why I ask is that in a fair number of coastal states, Wind/Hail coverage is an excluded peril by a majority of HO companies for coastal territories. In North Carolina for instance it is quite difficult to find a standard carrier east of I-95 that does cover wind at a reasonable price. As a result two policies are frequently written; A primary Hazard policy (under an HO or DP policy form), and a secondary Wind/Hail policy written thru the North Carolina Insurance Underwriting Association (aka the NCIUA, or Beach plan).
As well, If you take offense at me asking that the discussion be polite (I was not the one calling Clinton a “bimbo”, nor insinuating that someone lives in a cave), or have an issue with what I have said; please make your counterpoint with some dignity and not by trying to insult my intelligence.
I suppose I had a knee-jerk reaction, but quite truthfully, the ONLY (in my opinion) natural disaster East Coasters deal with annually are hurricanes. and well, i lived in japan for a year and a half and lived thru some of the worst typhoons (same as a hurricaine but generated out of the south pacific as opposed to the carribbean) they have seen since world war II. and truth be told…i’ll take a hurricane/typhoon any day of the week over a tornado.
Also, tornados have been known to generate all over the world.
from an insurance perspective, i won’t argue with you because i will openly admit, i am not as knowledgeable as you. BUT PLEASE, do not sit here and tell me and others that the devastation of a tornado which ANNUALLY destroys homes and towns is not as significant as a hurricane. At least with a hurricane, you know it’s coming, you know you can leave and potentially save your life and some of your belongings. Tornado victims aren’t afforded that right.
I’m so tired of people on the coast playing the victim card, and frankly you do. i don’t care if you want to live there, that’s your choice, but do not ever state that you are subject to a worse fate because of it. that’s all.
You do have a point on the tornados, I find it most unfortunate that middle America sees more in a month then most countries do in a year. I also agree that you do not need to help subsidize coastal hurricane risks… unless you move into a coastal region ;)
I do believe though, that the Cat risk pool is a good idea for disaster prone areas such as the Southeastern states and California (I include California in this due to earthquakes). However, I am of the belief that your state would not be very likely enter into a National Cat pool, nor do I think it is a good idea for you to do so, as your overall exposure to such major losses is minimal.
On the other hand, I also see the point of some of the others here that the Federal Loan/bailout of the individual state’s Cat pools is not a good idea.
While a tornado may be every bit as devastating as a hurricane to those affected by it, from an insurer’s standpoint it is a far easier event to deal with.
From any given incident, there are usually fewer claimants after a tornado than after a hurricane. Also, the damage is more clear-cut — no Wind vs. Water arguments. It’s easier to adjust and settle the claim.
Also, the more regular occurrence of tornados means that it is FAR easier to determine an appropriate rate for coverage in Tornado Alley than it is for the Gulf Coast.
Hailstorms in Nebraska give insurers more headaches than tornados.