for nearly 200 Years the reinsurance market has been the place where regular insurance company have come to protect themselves again catastrophic events. In the last decade or two that market has proven to be harder and harder to be profitable
Some very good friends. I’ve been involved in the market for over half a century. They have said they have not seen things as bad as they are today ever. Names are quitting the business right left and center. There is a seven year Exit window in the Lloyds insurance market. Names are quitting as they see that the last decade or so have generated no profits.
The catastrophic weather destruction of the past few weeks in the United States are largely absorbed by The reinsurance market, And when the Payout exceeds premium by nearly 200% this is not a good business.
Watching the destruction in North Carolina and today in Florida, just confirm what has been known for a long time that this is an insane market that is in and not an acceptable Risk.
The next stage for consumers is already written on the walls. There will be no Lloyds participation in the US reinsurance market. There is simply no appetite for that risk, especially since politicians will try to legislate increases in premium as if this was the nature of the problem.
it’s quite interesting to note that the Florida superfund, which is already considered much more expensive than private insurance is running out of money. considering Americans lack of financial knowledge and that the insurance concept is complicated. It’s more than likely that private insurance companies will simply quit the markets where they cannot obtain reinsurance, the funny thing, of course is that this has nothing to do with American politics and everything to do with little gray man in Lloyd’s market, deciding or being told that there’s no money left for this kind of plays.
Scarcity of capital is not only for lenders and borrowers. It’s also for insurance.
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