BREAKING! Bloomberg: Allstate

Mr CLS, a favorite commenter of ours on Yahoo ALL nailed this one well in advance in his post, “The Cheshire Cat who sat in the Willow tREe.”

A. M. Best now puts Lehman Brothers linked cat bonds on credit watch. The bonds in question are:
WILLOW RE Ltd
Ajax Re Ltd
Carillon Re Ltd
Newton Re Ltd.
As the guarantor of the swap counterparty has become bankrupt that technically means the swap agreements are terminated.

Willow weep for me, bend your branches down along the ground and COVER me.

Of course this all begs the question, who is covering Allstate’s Hurricane exposure? Was today’s commentary by AM Best on Allstate’s financial strength a bit premature? Perhaps leave out something? The good folks at Bloomberg tell the what and it is HUGE:

A catastrophe bond sold by Allstate Corp. faces “imminent” default following the collapse of Lehman Brothers Holdings Inc., Standard & Poor’s said. It would be only the second such security to fail in a decade.

New York-based S&P downgraded $250 million of debt sold by Allstate’s Willow Re Ltd. to D, the lowest grade, from CC, according to a Jan. 30 statement. Northbrook, Illinois-based Allstate set up Willow Re as a means of selling the bonds in 2007 to protect against claims from hurricanes, and investment losses by Willow Re aren’t tied to Allstate’s own portfolio.

The issuer has notified Standard & Poor’s that it will not have sufficient funds to make the scheduled interest payment,” S&P analyst Gary Martucci in New York wrote in the statement. Continue reading “BREAKING! Bloomberg: Allstate”

A Sam Friedman Must Read ….

While I was making the online rounds Saturday I noted National Underwriter Editor in Chef Sam Friedman has yet another blog entry on “the need for an iconic insurance superhero to serve as a positive role model and help improve the industry’s poor public image. That line of blogging generated Mr Friedman “a fascinating letter from Donna J. Popow, senior director of knowledge resources and ethics counsel at the American Institute for CPCU and the Insurance Institute of America.”

“Shortly after Hurricane Katrina, I was asked to do a spot on a local Philadelphia news station. I talked about what homeowners could do to get ready for a catastrophic event.

“After that spot I went to the producers and suggested to them that the real story coming from Hurricane Katrina was the work of the adjusters on the ground handling claims. They agreed with me, and asked if I could find them adjusters to speak with.

“I contacted several adjusters who I knew were handling claims in Louisiana and Mississippi. Each adjuster I contacted thought the idea was a good one–and each of their employers refused to give them permission to participate.

“As a lawyer, I can understand why; as a claims person, I was bitterly disappointed.

“As an industry we have done very little to publicize the good that we do. Usually the only publicity we get is in a law journal, where even a win for the industry is cast is a negative light because it usually means a policyholder or a claimant isn’t getting paid.

“Why shouldn’t our industry pat itself on the back for mustering hundreds of adjusters on short notice to respond to a catastrophe? Why shouldn’t the rest of the TV-watching, newspaper-reading public learn that these men and women—many of whom are volunteers—leave their families for weeks (or even months) on end to work these catastrophes, meeting with policyholders in extremely stressful situations, and diligently settling claims?….. Continue reading “A Sam Friedman Must Read ….”

The Florida Press Excoriates State Farm. Gov Crist Neither Captured or Impressed.

According the the Insurance Information Institute Mississippians pay the 6th highest rates for homeowners insurance (HO) in the country in a state with 6 coastal counties of 82 total. We are one slot ahead of earthquake prone California, three slots below the Florida, the entire state of which is prone to Hurricane wind damage.  By way of contrast South Carolina’s HO rates come in at number 16 despite being low and having a very developed coastline. North Carolina, with it’s famous outer banks of inhabited barrier islands comes in at 33 while Georgia, home to historic Savannah check in at 27. Texas and Louisiana check in with the highest and second highest HO rates respectively. While our good friend Sup can (and hopefully will) list the variety of reasons homewoners insurance rates vary so much from State to State for purposes of the remainder of this post I’ll operate under the assumption that in the complexity of the insurance marketpace and the associated state by state market fragmentation lies opportunity. Such as the opportunity for an insurer with a nationwide and global viewpoint to generate additional profit via ye old money change by statutory fiat. Perhaps this post will illustrate why.

We will begin with a compare and contrast between how Florida Governor Crist has handled big insurance versus our elected insurance commissioner’s genuflect  and beg approach. The Mississippi GOP has chosen to directly subsidize our wind pool with the money going to buy more reinsurance. Florida, OTOH now requires transparency and learned first hand that bending over backwards for insurers didn’t mean the citizens got a good deal. Does State Farm’s announcement it was leaving Florida last week really mean Mississippi’s insurance market (where State Farm is refusing to write new policies) is “healthier” than Florida’s (where the Farm is pulling out)? Let’s start with Commissioner Chaney’s press release on that topic:

Commissioner Chaney also states in the letter that the Mississippi insurance market is in a very different and much healthier position than the Florida market.

“The Mississippi Insurance Department has worked very diligently to avoid finding Mississippi in the same situation as Florida,” Chaney said.

Do average Mississippians buy into that? Let’s hear what they have to say:

“The politicians have given the insurance companies a license to steal.”

“They are a full line insurance company. They should not be allowed to cherry pick. Our insurance commission should run them out of the state.”

“Time to take the policies for my life insurance, wifes life insurance, the 3 vehicles that are insured, the RV’s insurance and health coverage somewhere else. If enough policy holders would actually do this also, we could run them off the coast. Insurance Commission won’t do it.”

“Why are we allowing the insurance companies to hold the residents of the Mississippi hostage? For decades, we’ve paid whatever they have requested, and when the first major catastrophe hits, this is the treatment we receive. If State Farm is so adamant in their position in the way they do business in our state, why are they still here? Why are we accepting this treatment?”

The difference is striking and begs a natural question. Are coasties drinking all the koolaid or are our elected officials here in Mississippi peeing on our legs claiming rain? The press and editorial boards across Florida are giving this insurance thang a hard looksie (H/T Steve). First off is columnist Michael Mayo of the Orlando Sun Sentinel who comes to the conclusion we need a good multi peril solution in his column “How do we cure Florida’s sick property insurance system?”: Continue reading “The Florida Press Excoriates State Farm. Gov Crist Neither Captured or Impressed.”

Cookie Cutter Justice – USA v Warr

It is the spirit and not the form of law that keeps justice alive.

Hang with me and, hopefully, by the end of this post, you’ll see how the title, the quote and USA v Warr are connected.  Maybe.

Having never seen House Beautiful report on an indictment or the National Inquirer cover a home renovation, I can’t tell if I’ve linked to a news story (or what).

There are several central issues in the indictment against the Warrs. They include whether or not the Warr home was both their primary residence and occupied by them at the time the hurricane hit on August 29, 2005. These occupancy requirements are cited in the rules for receiving a Homeowner Grant from the Mississippi Development Agency (MDA).  A MDA Homeowner Grant provides up to $150,000 to help rebuild homes damaged or destroyed by Katrina’s storm surge that were outside the federal flood zones that existed at the time of the hurricane. The Warrs did receive the full amount.

The reference to “rules” – not law, not federal regulation but “rules” – is significant.  Federal assistance to the states has two audit trails.  One measures compliance with related fiscal requirements and the other measures compliance with program requirements. The two audit trails, however, are interdependent.  Simply stated:

Try, try, try to separate them
Its an illusion
Try, try, try, and you will only come
To this conclusion
Love and marriage, love and marriage
Go together like a horse and carriage…
You can’t have one without the other.

Matt Jadack was Deputy Inspector General for Disaster Assistance Oversight when he submitted testimony to Congress on the challenge the FEMA faced in that regard: Continue reading “Cookie Cutter Justice – USA v Warr”