Folks disappointed would be the word that describes my reaction to Becky Mowbray’s story that appeared in today’s T-P under the lede New Orleans area deserves better insurance options. I’ll be so bold and suggest that Becky contact Paige St John at the Herald Tribune and Karen Clark, founder of AIR Worldwide because that story in today’s paper was a stinker on several levels IMHO.
The public outreach and education never ends folks. 😉
OK folks, I’ve written a good bit on weather modeling most of which in one way shape or fashion has its roots in the work of Karen Clark, a woman with a keen financial intellect, that literally pioneered the field. Her story is reminiscent of HAL 9000 and a South Park episode. It is also my considered opinion Ms Clark is one of the good guys in the insurance wars. I mentioned this general topic and its importance with the last State Farm rate hike here in Mississippi using very plain english but no journalist here in Mississippi was up to the challenge of reporting it. I say that because if there is one area in the rate setting process that is completely suspect it would be in the loss assumptions indicated by the models. These concepts are equally applicable in other states besides Mississippi that now face insurance rate hikes such as our neighbor Alabama. Finally in the land where people get it, FLOIR Commish Kevin McCarty busted Allstate using bogus short-term models to calculate a 65% rate hike in Florida in 2008.
Besides Sop, Karen Clark understands the implications. She left the company she founded, AIR Worldwide (most likely forced out IMHO), founded another company and went public with her concerns on how the information produced by those models was being misused. It was no surprise to me then when a reader sent me this link from the National Underwriter:
Catastrophe modeling firms’ hurricane damage predictions overestimated insured losses for a second year, according to a catastrophe prediction consulting firm.
Karen Clark & Company in a report said models designed to project U.S. Atlantic hurricane insured losses for the five-year period ending in 2010 “have significantly overestimated losses for the cumulative 2006 through 2009 seasons.”
“Hurricane activity is very difficult to project because the Earth’s atmosphere is very complex and has many feedback mechanisms,” said the report. “Given all of the uncertainties, near-term projections do not have sufficient credibility to be used for important insurance applications such as product pricing and establishing solvency standards.”
Predictably Karen’s wayward babies were having none of it: Continue reading “Lets talk cat modeling and insurance rates: Karen Clark welcome to slabbed.”
The Sun Herald reports Mississippi Insurance Commissioner Mike Chaney on Wednesday told State Farm Fire and Casualty Co. he has temporarily denied its request to increase homeowners’ rates by 45 percent in the state’s three coastal counties.
h/t Y’all Politics
Chaney said he notified the company he needs more information. Chaney said he ultimately intends to deny the request, but: “We’re open to negotiating with them.” He said it could be months before a final decision is made…
State Farm spokesman David Majors said the company intends to fulfill Chaney’s request. “We’ll provide as much information as we can and work with the department with any request so that we can get the rate we’ve requested in the lower three counties,” Majors said.
State Farm is the largest insurer in Mississippi. Chaney said the company has about 26,000 policies in coastal Hancock, Harrison and Jackson counties, which were hit by Hurricane Katrina in 2005…
Chaney said at a press luncheon this week in Jackson that he didn’t think State Farm’s 45 percent request is justified. “State Farm told us they would not write any new business on the Gulf Coast even if we gave them the rate increase,” Chaney said Tuesday. “I don’t know what the incentive would be to even give them a rate increase.”
During those “months”, Chaney will receive a report from AIR Worldwide.
Mississippi Insurance Commissioner Mike Chaney and wind engineering firm AIR Worldwide have agreed to terms on a contract on a cost/benefit study required by the Mississippi Legislature leading to development of a hurricane wind damage mitigation.
AIR – a member of the ISO Family of Companies – said it will also recommend the best ways to Continue reading “Chaney closes door to State Farm’s proposed 45% rate increase – a screen door to let AIR in and out”
Time is short so I’ll not offer much analysis and what analysis I offer is in the form of the questions I asked myself while reading it?
- What money “made the market” and how and to whom are the bonds placed (ie sold)? See this lengthy post I did a week or so back to understand why that question is important.
- What role is TARP playing in financing this deal? Inquiring minds in policymaking positions what to know. (See first bullet point)
- Who are the players making money from the act of doing the deal and how is it structured to avoid past mistakes?
Reuters has the story:
LONDON, Feb 27 (Reuters) – Standard & Poor’s has assigned a preliminary BB rating to U.S. insurer Liberty Mutual’s planned $200 million catastrophe bond, to be issued via special purpose vehicle Mystic Re II, the credit rating agency said.
In a pre-sales report published late on Thursday, S&P said Mystic Re II’s Series 2009-1 notes will transfer some potential losses by Liberty Mutual and affiliates from U.S. hurricanes and earthquakes to capital markets investors. Continue reading “News from the cat house……”