Tag: Reinsurance

Twofer Tuesday Business

First up is the RollingStone’s Matt Taibbi take down of the New York Times’ Thomas Friedman, who likely has no clue how the average American citizen lives their daily lives. Friedman, likely the wealthiest journalist in the country, is an unabashed proponent of globalization that sees the world divided into two factions, those that like the trend towards the globalization of the world’s economy and those that don’t.

The problem for Friedman being the entire topic is far more complicated than simply painting the opponents of globalization as election year losers (think Bernie Sanders supporters and soon Trump’s). To understand where I’m going with this you must first read Taibbi’s piece because the price of globalization is inequality (income, political and other) along the decimation of the United States middle class. These built in inequalities drove the Brexit vote and no doubt plays a role in the thinking of both Trump and Sanders supporters, which I’m going to illustrate with a picture a reader sent me a while back:

Reader Submitted Photo of the Royal Dutch Shell Special Projects Office in New Orleans, Louisiana. Desks that were once occupied with college educated engineers have been empty for well over a year
Reader Submitted Photo of the Royal Dutch Shell Special Projects Office in New Orleans, Louisiana. Desks that were once occupied with college educated engineers have been empty for well over a year

Those that follow Slabbed’s twitter timeline have witnessed our coverage of the downsizing of the New Orleans RDS office, which I’m getting from a very well placed source. Shell has not exactly made a secret of what they are doing downsizing its New Orleans office but you can’t view what is happening now through the same lens used to examine previous oil patch bust layoffs. Here is an edited comment from Slabbed’s source on the current happenings in NOLA at RDS: Continue reading “Twofer Tuesday Business”

Why Paige St John won’t have to worry about the Wall Street Journal taking her Pulitzer Prize for insurance reporting.

I now try to avoid telling people how many years I’ve run both my own accounting practice and helping my much larger private sector clients prosper in one of the most competitive industries in our economy so I don’t betray the fact I’m on the fast downhill slide to the big five-oh.  That said and in light of true participation in the market economy of this once great nation there are times I read something in a national finance publication and I wonder which ivory tower these people have been smoking crack in.  So along those lines through time I’ve blogged here on Slabbed the folks over at the Wall Street Journal have come up a time or two.

Sadly I must report I did say the WSJ Editorial Board were a band of “lit and hallucinating buffoons” but that was only because they were unfavorably comparing a solvent state-run insurer of last resort in Florida Citizens with an insolvent one in Louisiana Citizens. The stupidity was simply stunning folks but these Ivory Tower sellouts are the same bunch that gave us the 2008 market crash and 10+% unemployment with their self-serving no-regulation rhetoric so I frankly should have never expected much from ’em.

And it is also true that late last year I skewered a couple of the WSJ beat reporters for passing off PR fluff from Allstate as a serious news story but again this group probably also buys into the concept of big business being able to impartially self investigate their own misdeeds but hey don’t take that from me as Sam Antar aka of “Crazy Eddie” infamy and one of the most famous fraudsters of all time discusses that issue in-depth on a sister new media website to Slabbed, the Business Insider. The bottom line is it is against that backdrop that I highlight another incredibly clueless Hurricane Irene/Insurer of Last Resort story by the WSJ dynamic duo of Erik Holm and Leslie Scism where their main source was some cat named “Critics“.  A search of our Slabbed files revealed one of the Insurance disInformation Institute’s Bob Hartwig’s aliases was indeed “Critics” so it is easy to identify what industry PR outfit fed Holm and his sidekick this “Hurricane Irene” story which rests on the following undisputed assertions from Mr Critics: Continue reading “Why Paige St John won’t have to worry about the Wall Street Journal taking her Pulitzer Prize for insurance reporting.”

This very well could be the most important Slabbed post of the year…

And it has nothing to do with Jefferson Parish Political Corruption.

For literally years our good friend Mr CLS has been methodically hammering away at the complexities surrounding insurance securitization and the implications of such for each and every one of us, especially those of us on the coast being price gouged for wind coverage. So suppose you’re a reporter with insurance beat responsibilities like Becky Mowbray, Anita Lee, Jeff Amy, Paige St John, Beatrice Garcia or a national outfit like Bloomberg that has done some quality coverage on insurance issues that is ready to kick it up a notch in terms of understanding.  What is now coming to light with Bank of America’s alleged forced placed insurance fraud is a must read as more turds float to the surface in the global insurance finance cesspool.

Some of the very same problems could very well exist in other facets of the securitized insurance market; problems the folks at U Penn Wharton School no doubt did not conceive of when they were pioneering insurance linked securities such at Catastrophe Bonds not long ago as the reasons for the lack of market transparency in the global insurance markets come into sharper focus.

Don’t look for the political shoe shine boys for big insurance such as the coast’s own Steven Palazzo or Commish Mike Chaney to say much on this.  Both men, despite paying lots of lip service to the topic of insurance, remain firmly, purposely ignorant of the any fraud perpetrated by their big business buddies on Wall Street.

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London Bridge is falling down – Windpool Board there to build it up

“London Bridge is falling down…
How will we build it up…
Build it up with silver and gold,..
Gold and silver I have none,
I have none, I have none.”

“The Mississippi Windstorm Underwriting Association…insures about 46,000 coastal residences with about $7.1 billion in coverage.”

Talk about numbers that will blow you away – according to data from the Census Bureau, 46,000 residences is just slightly less than a third (29%) of the 158,984 housing units in the three coastal counties of the State.  In Hancock County, hardest hit by Hurricane Katrina,when data were collected in 2009,  there were only 15,563 housing units.  Current information on the average value of a housing unit in Hancock County was not available; but, $92,500 was listed as the median in 2000.

The point? Using the data from Hancock County as the basis for a guesstimate,  the number of covered residences and amount of coverage provided seem higher than one might expect from the State’s “insurer of last resort”.

Nonetheless, gulflive.com, reports, “members of the state wind pool board are headed to London this week to seek out low reinsurance rates that will help keep down policyholders’ premiums” – including the member who is Allstate’s Tennessee-based Regional Counsel!  The fox-in-the-hen-house composition of the Board was maintained inHB1500, legislation that converted the Board from an “arm of government” into a private, non-profit entity – obviously without requiring transparency on a website more function than one designed for the Flintstones.

The purpose of the trip is to develop Continue reading “London Bridge is falling down – Windpool Board there to build it up”

Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.

Louisiana Insurance Commissioner Jim Donelon

Folks rarely does a business writer nail and explain a very complex subject in the interplay between our fragmented insurance markets here in the US  and the world of high finance but Paige St John over at the Herald Tribune explains how State Farm really didn’t pull out of Florida’s hurricane insurance market, how they game the anti trust exemption insurers enjoy and how they are able to price gouge as a result.  These same forces are at work in Mississippi, Alabama, Texas and Louisiana.

We last featured Paige’s work last October in our post It’s a ‘Bermudan’ day in the neightborhood…Paige St John at the Herald Tribune exposes why ‘buying Bermuda’ is like being hooked on crack and it is clear Paige is on track for a big time business journalism award for her work in this area.  Finally it was our post on Paige’s reporting on the Allstate McKinsey papers that literally landed us on the national blawg scene as Victoria Pynchon covered our coverage.

Here are a few excerpts:

When State Farm stepped up its march out of Florida, it loudly and publicly claimed hurricanes were pushing it toward financial disaster.

The company argued it had to leave the Florida coast — and drop nearly half a million customers — because it could not profit in a state wracked by so many storms.

But State Farm never really left Florida. Continue reading “Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.”

It’s a ‘Bermudan’ day in the neightborhood…Paige St John at the Herald Tribune exposes why ‘buying Bermuda’ is like being hooked on crack.

Is Paige St John at the Herald Tribune a member of the Slabbed Nation?  Let them eat cake indeed Mikey.

The new Florida norm are carriers like ACA Home, a tiny St. Petersburg home insurer started after 2005 with funding in part from a Bermuda reinsurer.

ACA Home has no employees and pays an affiliate, American Strategic, to run its business.

Financial filings show reinsurers take 86 cents of every premium dollar ACA collects – $9 million of the $10.5 million it collected in 2009.

The cost for turning over almost all of its risk is high. ACA pays as much as 33 cents for $1 of protection against the most likely kind of storms, the equivalent of paying $66,000 a year to insure a house worth $200,000. Continue reading “It’s a ‘Bermudan’ day in the neightborhood…Paige St John at the Herald Tribune exposes why ‘buying Bermuda’ is like being hooked on crack.”

State Farm decides to “mess with Texas” – sues insurance department!

My computer “ate my homework”! Actually, it garbled the post I had for this morning; but, here’s a news flash to give you something to think about while I finish rewriting:

State Farm Insurance has filed a lawsuit against the Texas Department of Insurance after the state agency took the unprecedented move of publicizing on its Web site recent rate hikes by the company.

Texas’ largest insurer filed suit Tuesday, seeking to protect from disclosure certain information that State Farm said could benefit its rivals in the insurance industry.

Department spokesman Jerry Hagins says the agency’s position is that all documents associated with a rate filing are public information. Posted were two State Farm rate proposals filed over the last eight months that increase homeowner premiums an average of 13 percent.

Hagins tells The Dallas Morning News that the decision to post was partly the result of increases filed so close together.

Another news brief on the suit reported, “State Farm spokesman Kevin Davis said information posted online by the Texas State Department of Insurance ‘contains information about reinsurance’ that would benefit rival companies…”

SLABBED readers will recall that State Farm is self-reinsured and Texas is not the first State to question those costs.  In fact, the Company’s assessment of reinsurance was the chief cause of the controversial rate increase in Florida and a concern expressed when State Farm more recently filed for rate increases in Mississippi and Louisiana. However the Company is no stranger in Texas courts.  Here’s a bit of  background on the story behind the story published after the first of the two rate increases at issue: Continue reading “State Farm decides to “mess with Texas” – sues insurance department!”

Insurance costs hit home, for all of us – including the good neighbor and LA Insurance Commissioner Donelon, too

“One thing is certain.  The more we all spend on insurance, that’s less money that we spend on other things, like cars, and refrigerators, and clothing.  Until the problem is solved, our recovery will never be complete…”

WLOX reporter Doug Walker hit the road for a week in January to learn more about the insurance situation and found Insurance costs hit home, for all of us.

During my travels, I met a widow whose insurance bill has climbed from $2000 a year in 2004 to more than $7000 now.  Another homeowner was told his insurance was going up from $2400 a year to $6300.  He finally got a policy through an independent broker with Lloyd’s of London for $4000.  The list goes on and on.

Indeed, the list does go on and on and, as Walker points out, insurance cost is not just a Mississippi issue.  State Farm found that out yesterday and Rebecca Mowbray caught the story for the Times Picayune – Insurance Commissioner Jim Donelon rejects 19 percent statewide rate increase request by State Farm.

“This is an out-and-out rejection,” Donelon said. “We’re so far apart, we don’t feel like there’s a reasonable chance for compromise.”

State Farm, which is free to submit a new request, said that it was stunned and disappointed by the rejection…

If the request had been granted, State Farm would have been able to collect an additional $67.6 million from its customers in Louisiana. (emphasis added)

State Farm’s requested increase would have pulled $67,600,000 from Louisiana’s economy.  Calculated for the items listed in Walker’s post,  there would be  2380 fewer new cars purchased or 56,333 new refrigerators sitting in stores – or, worse yet,  the 781,403 school-age Who Dat’s would not be wearing a replica of Drew Brees’ Super Bowl jersey.

Donelon’s rejection is the culmination of a battle that has been brewing over the past year over State Farm’s use of a hurricane computer model that seems to project a need for much higher rates than its competitors. Continue reading “Insurance costs hit home, for all of us – including the good neighbor and LA Insurance Commissioner Donelon, too”

More news from the Cat House: The unregulated, nefarious Bermudan market for collateralized reinsurance. Can’t match those yields…

That’s right folks, this is the market our politicians like Commish Mike Chaney and his band of GOP idiots tell us we should trust and believe in. Never mind what happened when this coutry’s official economic policy was to trust the unregulated derivates market, the gang in Jackson has their story and they are sticking to it. Perhaps this is also why our state’s windpool has become a bottomless pit for taxpayer subsidy. I’ll let the good folks at Risk and Insurance Online explain:

But perhaps the investor summed up all his unspoken concerns when he stood up at the end of the presentation and asked, in not so many words: Isn’t it true that you reinsurance guys keep all the good catastrophe risks for yourselves, then give what’s left to catastrophe bond investors?

It is a matter of debate whether the speakers denied that or not, but what they did say definitely is that collateralized reinsurance has its own special place in the world of insurance-linked securities (ILS), separate from CAT bonds. It’s not that one product covers better property-catastrophe risks than the other.

It’s that collateralized reinsurance has found itself a niche at the bottom of the reinsurance program. Collateralized reinsurance usually comes into play at the lowest layers of a primary carrier’s reinsurance program. We’re talking even below the traditional “working layers” where the big-name reinsurers play.

Yep we have a new kid on the block in Collateralized Re and guess what kids? It operates in a non transparent market out of Bermuda as we continue: Continue reading “More news from the Cat House: The unregulated, nefarious Bermudan market for collateralized reinsurance. Can’t match those yields…”