Over this past summer, I was an intern at a private insurance brokerage firm in downtown Los Angeles working with real claims, many including automobile, property, general liability and workers’ compensations line of coverages. I came across an article of the estimated property and casualty claims that Hurricane Isaac will cost insurers just onshore alone and my initial thought and concern were for the homes, buildings, property and the general well being for those devastated by this storm.
According to Rod Fox, CEO of reinsurance broker TigerRisk Partners, the property-casualty insurance companies are looking at an estimated final onshore claim costs between $1 billion and $2 billion. The majority of the claims and losses will be covered by primary insurers like Allstate, Travelers, followed by the small regional insurers and even possibly coverage from the reinsurers, although Fox did specify that losses for reinsurers will be minimal.
From my own understanding and knowledge of reinsurers and reinsurance, I do know that “reinsurance” is a typical term used for insurance for insurers and that it is also the practice of insurers transferring portion of the risk portfolios to other parties that is underlined in accordance. The sole purpose of why reinsurance exists today is so that the insurer can reduce and minimize the likelihood of having to pay a large obligation resulting from an insurance claim.
With that being said, the article mentioned that there would be only one company that would rely on their reinsurer, Louisiana Citizens, whom is considered the 4th largest property insurer in the state and the state’s insurer of last resort for homeowners who can’t find coverage elsewhere. With Hurricane Isaac on the offense and attack, Louisiana Citizens is looking at a situation where homeowners and businesses concentrated along the Louisiana coastline seek desperate aid, coverage and emergency services with around $21.8 million in total exposure on the line.
Now, the Citizens reinsurance will only kick in when its total losses hit up to $200 million; however, once losses reach over that $200 million mark, the loss from the state-run insurer will be consumed by the capital market per prior agreement when Citizens sold a catastrophe bond called Pelican Re. The accordance states that this Pelican Re bond will trigger to the open market when losses reach that $200 million level, which would only bring more catastrophe to the bond market if the Citizens bond triggers.
Now as an accounting major, I’ve always been more interested with the financial status of a business or company, rather than the product, services, or the insurers behind it. Rather than trying to determine a company’s debt to equity ratio or how much of equity are provided through banks and private sources to keep the company running, I have learned to think from an insurer’s perspective after my 10 weeks in the insurance industry. I’ve thought about the earthquakes in California and how important it is to insure buildings, and why a customer’s slip and fall in a business would fall into a general liability line of coverage for that business. Insurance is a whole new language itself, but I am fascinated to learn the underwriter’s role and how all the coverages and policies work and apply to actual business and everyday life.
mytomsperspective 