A.M. Best Special Report: Credit Crunch Clouds Outlook Of Hurricane Insurers, Cat Funds.OLDWICK, N.J. -- Turmoil in the credit markets could leave policyholders in limbo if a major hurricane strikes the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. this year, as investors show a limited appetite for capital market offerings designed to raise cash for claims payments. Meanwhile, the same subprime mortgage crisis that rocked the credit markets raises questions about insurers' exposure to foreclosed and abandoned properties in hurricane-prone states. * Florida's largest insurer and state-run reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. , dependent on post-event bond offerings to cover any cash shortfall, may lack the funds to immediately pay all claims from a major storm. * Other states have examined similar financing as wind and beach pools see significant growth in liabilities. * The Florida Hurricane Catastrophe Fund (FHCF FHCF Florida Hurricane Catastrophe Fund FHCF Flying Horse Cracking Force (hacking) ) is exploring other options to manage its liquidity and capacity risk amid tightening credit markets. * Florida's Citizens Property Insurance Corp. and Louisiana Citizens Property Insurance Corp. are restructuring auction-rate debt in response to turmoil in that part of the municipal bond market. * Insurers could incur credit risk for their reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables tied to the FHCF if the fund has trouble raising money, while claims payments for Citizens' policyholders could be delayed. * The Texas Legislature The Texas Legislature is the state legislature of the U.S. state of Texas. The legislature meets at the Texas State Capitol in Austin. In Texas, the Legislature is considered the most powerful branch of state government because of its aggressive use of the power of the purse to , when it reconvenes in 2009, may give the Texas Windstorm wind·storm n. A storm with high winds or violent gusts but little or no rain. windstorm A storm with high winds or violent gusts but little or no rain. Insurance Association bonding authority after its exposure increased 55.6% in the 15 months through March 2008. * State and federal funds Federal Funds Funds deposited to regional Federal Reserve Banks by commercial banks, including funds in excess of reserve requirements. Notes: These non-interest bearing deposits are lent out at the Fed funds rate to other banks unable to meet overnight reserve ultimately may come into play if hurricane losses exhaust the resources of insurers of last resort. * The subprime mortgage crisis has driven the number of properties in foreclosure past 500,000 in hurricane prone coastal states. * Unoccupied, unsecured properties may be at increased risk in a storm, and financial stress on homeowners may increase the temptation to commit fraud. BestWeek subscribers can download a PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at www.bestweek.com. Nonsubscribers can download a PDF copy of the full special report (14 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from our Website at www.bestweek.com. Call customer service for more information, (908) 439-2200, ext. 5742. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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