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.”

Slabbed Daily July 13: Presidential Daily Briefing Edition

There is a good and topical insurance news story today that caught my attention, especially since it relates to a post I did on the recently released National Association of Insurance Commissioners whitepaper on their recommendations for a national response to the problems related to availability and affordability of catastrophic property and casualty insurance. In that white paper the Commishes reported there was plenty of private market capital available to back the risks. Of course I think the Commishes are all wet on their conclusions and for some backing on that assertion I offer one of our favorite insurance people here on slabbed in support of my conclusions, Mr Warren Buffet himself. The Wall Street Journal (subscription required) has the story:

Berkshire Hathaway’s reinsurance business, a big profit center for the diversified company, has pulled back from one of the more volatile corners of the reinsurance market: catastrophic property damage.

In recent years, Berkshire Hathaway Reinsurance Group made a push into the profitable business, in essence writing insurance for other insurers that wished to offload some exposure to big losses like hurricane damage. Just a few years ago, Berkshire pulled in $2.2 billion in premiums on a year that saw no major storms.

But recently, Berkshire has become more cash-constrained. Its retreat in “cat” reinsurance suggests it has become more risk averse amid a recent downgrade to its credit rating, a series of hits to Berkshire’s bottom line and ongoing turmoil in the economy.

In May, at the company’s annual meeting in Omaha, Neb., Berkshire Chairman Warren Buffett said the company is “doing less natural risk in terms of hurricanes because…we don’t have as much excess capital as we had a couple years ago.” At the end of the first quarter, Berkshire had slightly less than $20 billion in cash, its lowest level in years. Continue reading “Slabbed Daily July 13: Presidential Daily Briefing Edition”