This has been a Ponzi scheme from the beginning, and everyone in the insurance industry knows it. Real reinsurance costs a lot because Florida is a high risk state, and reinsurers have to have adequate capital to meet their claims obligations.
It’s easy to drop the rates when buying phony reinsurance that doesn’t have the cash to meet its foreseeable needs – as even the OIR and Legislature now appear to recognize.
Likewise, it’s easy to undercut legitimate insurers when the main competition, Citizens, maintains rates at artificially low levels. The entire state-supported system is actuarially unsound and has been from the beginning.
For the legislators who argue that it’s unfair to increase rates for homeowners in these stressful economic times, how much more stressed do you think they’ll be when (a) their companies can’t pay the claims, and (b) they get surcharged for the rest of their lives?
There isn’t a shred of intelligence detectable in Florida these days.
It’s not just FL. The feds are into Ponzi too. Just wait for the bills to start coming in on our federal spending… They already have added a significant tax on all of those rich smokers… I’m sure no one making less than $250k smokes or that would mean that someone was a little disingenuous about not raising taxes on the middle class.
Tom, I don’t disagree with most of your comments. However, don’t lump all “smaller” insurers together. There are many carriers that aren’t market monsters who are still doing things the right way. ASI being an outstanding example and even St. Johns has positioned themselves well with their surplus position and the matching money from Florida (and I beleve Louisiana).
I would definitely agree that for the companies who start with minimal surplus capitalization and count on the infusion of unearned premiums to lift them into a viable position, they are playing Russian Roulette with three of the six chambers full. An event of only the magnitude of Wilma could take them out if it makes landfall in their first year of operation. Even with a good quota share program, most of these carriers are being forced to take higher and higher front end retention with the market as it currently stands. At minimum surplus, that alone could impair a company based on the spread of risk.
My last point is more of a question: which ones are the “legitimate insurers” that you are referring to? Is that State Farm? Allstate? AIG? The Hartford? Florida is trapped between artificially deflated rates, an inability to get rate adequacy to maintain an actuarially sound book of business and the rest of the pack who have to stay somewhat rate competitive while watching indemnity triple in some areas of the state.
By “legitimate” I mean any insurer, large or small, with an established track record, subject to the full scope of financial regulation by the various states, with reinsurance placed with “A” category reinsurers, which has sufficient surplus to be writing at about a 1:1 ratio (or not significantly worse), etc.
That could indeed include newer, smaller companies – but is going to exclude any company that’s not financially sound enough to be participating in this market.
We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. By continuing to use our site, you accept our revised Privacy Policy.
I wonder how many more take out carriers like Coral will face this situation once they have to go out and purchase real reinsurance.
I guess too many people bartered their rates down and caused this
This has been a Ponzi scheme from the beginning, and everyone in the insurance industry knows it. Real reinsurance costs a lot because Florida is a high risk state, and reinsurers have to have adequate capital to meet their claims obligations.
It’s easy to drop the rates when buying phony reinsurance that doesn’t have the cash to meet its foreseeable needs – as even the OIR and Legislature now appear to recognize.
Likewise, it’s easy to undercut legitimate insurers when the main competition, Citizens, maintains rates at artificially low levels. The entire state-supported system is actuarially unsound and has been from the beginning.
For the legislators who argue that it’s unfair to increase rates for homeowners in these stressful economic times, how much more stressed do you think they’ll be when (a) their companies can’t pay the claims, and (b) they get surcharged for the rest of their lives?
There isn’t a shred of intelligence detectable in Florida these days.
Check your facts!
Coral was not a “take-out Company.
It’s not just FL. The feds are into Ponzi too. Just wait for the bills to start coming in on our federal spending… They already have added a significant tax on all of those rich smokers… I’m sure no one making less than $250k smokes or that would mean that someone was a little disingenuous about not raising taxes on the middle class.
They are all take out companies in my book. Small capitalization and low rates.
Tom, I don’t disagree with most of your comments. However, don’t lump all “smaller” insurers together. There are many carriers that aren’t market monsters who are still doing things the right way. ASI being an outstanding example and even St. Johns has positioned themselves well with their surplus position and the matching money from Florida (and I beleve Louisiana).
I would definitely agree that for the companies who start with minimal surplus capitalization and count on the infusion of unearned premiums to lift them into a viable position, they are playing Russian Roulette with three of the six chambers full. An event of only the magnitude of Wilma could take them out if it makes landfall in their first year of operation. Even with a good quota share program, most of these carriers are being forced to take higher and higher front end retention with the market as it currently stands. At minimum surplus, that alone could impair a company based on the spread of risk.
My last point is more of a question: which ones are the “legitimate insurers” that you are referring to? Is that State Farm? Allstate? AIG? The Hartford? Florida is trapped between artificially deflated rates, an inability to get rate adequacy to maintain an actuarially sound book of business and the rest of the pack who have to stay somewhat rate competitive while watching indemnity triple in some areas of the state.
It’s a sickening predicament for all of us.
Pier, fair enough. That was a broad comment.
By “legitimate” I mean any insurer, large or small, with an established track record, subject to the full scope of financial regulation by the various states, with reinsurance placed with “A” category reinsurers, which has sufficient surplus to be writing at about a 1:1 ratio (or not significantly worse), etc.
That could indeed include newer, smaller companies – but is going to exclude any company that’s not financially sound enough to be participating in this market.