Friday, July 30, 2010
| Make Florida More Hurricane-Resistant
published: Sep 28, 2009
by: Eli Lehrer and John Hallman
As hurricane-ridden September passes by, much of the news in Florida appears good: Hurricanes, so far, have stayed away from U.S. coastlines, the Legislature has passed a few common-sense reforms to the state's property insurance system and state CFO Alex Sink says that the state's troubled Hurricane Catastrophe Fund (Cat Fund) has gained a firmer fiscal footing. more... |
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| A catastrophe waiting to happen
published: Sep 15, 2009
by: Jonathan Orszag
This month marks the fourth anniversary of Hurricane Katrina. That raises a simple question: Are we prepared as a Nation for the next mega-catastrophe (one, perhaps, worse than Katrina) that will inevitably strike our country? more... |
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| The Meltdown Next Time: The financial danger nobody knows about.
published: Sep 12, 2009
by: Eli Lehrer
When the insurance giant American International Group was threatened with collapse in late 2008, its credit default swap business and other international operations were cited as the heart of its troubles. But the largest consequence of AIG's uncontrolled failure on consumers' pocketbooks could have come from the domino-like collapse of its businesses writing insurance on boats, cars, homes, lives, and just about everything else. If these businesses fell apart as a result of AIG's overall collapse, the argument went, the contagion could have brought a collapse of everything from retirement savings plans to auto insurance claims payments from companies unconnected to AIG. (In theory, the operations were firewalled from AIG's other operations, but the extremely slow rate at which they've found buyers indicates that many had significant exposure to the company's other woes.) more... |
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CEI Responds to Tower Hill Rating Downgrade: Over-Regulation Is Mostly to Blame |
by: Richard Morrison
published: Aug 31, 2009
Tallahassee, Florida, August 31, 2009—The Competitive Enterprise Institute, a free market think tank, reacted to A.M. Best’s rating downgrade of Tower Hill Insurance Companies and Tower Hills’ subsequent decision to withdraw from Best’s rating process. The recent downgrade followed a decision by the Florida insurer to replace nearly worthless CAT Fund coverage with reinsurance from the private market, which A.M. Best found temporarily affected the company’s financial standing.
''Tower Hill's purchase of private reinsurance in addition to state-mandated CAT Fund coverage protects its policyholders and ensures payment of claims in the aftermath of a hurricane,'' says Christian Cámara, director of CEIs Florida Insurance Project. ''Unfortunately, Florida's existing regulatory system discourages companies from doing this, as they have to jump through onerous bureaucratic hoops to charge what they need to in order to invest in this additional level of coverage.''
Cámara calls for an insurance regulatory environment that allows insurers to freely charge what they need to remain solvent. ''We need a systems that encourages more responsible diversification of risk through private reinsurance and less reliance on risky, government-run mechanisms,'' he says.
Eli Lehrer, Director of the Center for Risk, Regulation and Markets at the Competitive Enterprise Institute, says that the main issue is the Cat Fund. ''This isn't about whether or not A.M. Best made the right decision. I don't want to second guess them. The real problem here is that the instability of the Cat Fund creates uncertainty in the market. Florida would be better off without it.''
CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government. For more information about CEI, please visit our website at www.cei.org.
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