Please take note: a state cat fund with a national cat fund behind it is nothing more than a massive subsidy to the direct writers. Time to wake up and fight to keep your market share.
Icee, I would like to hear bud guy’s answer to your questions too, but I think a cat fund may be a subsidy to direct writers because if the gvt. will step in and pay claims in case of a “large” event, then direct writers will not need to buy so much reinsurance. I think the key here is what will be the “trigger level” where the gvt. will step in. In my view, and I suspect bud guy’s view as well, is that the trigger level should be so high as to not crowd out the private market. Unfortunately, I don’t think this will be the case, though. Ideally, the government funds would be there only in case a large event, or series of natural disasters threatned the liquidity of the private P&C insurers and reinsurers.
Thanks David. Your explanation makes sense if bud guy was talking direct companies vs reinsurance companies.
But I think he is talking direct writers vs independent agent companies and in this case I don’t see how a cat fund helps the direct writers any more than it helps the independent agent companies.
Please take note: a state cat fund with a national cat fund behind it is nothing more than a massive subsidy to the direct writers. Time to wake up and fight to keep your market share.
I must be missing something. Can you please explain to me how this is a subsidy to direct writers?
Icee, I would like to hear bud guy’s answer to your questions too, but I think a cat fund may be a subsidy to direct writers because if the gvt. will step in and pay claims in case of a “large” event, then direct writers will not need to buy so much reinsurance. I think the key here is what will be the “trigger level” where the gvt. will step in. In my view, and I suspect bud guy’s view as well, is that the trigger level should be so high as to not crowd out the private market. Unfortunately, I don’t think this will be the case, though. Ideally, the government funds would be there only in case a large event, or series of natural disasters threatned the liquidity of the private P&C insurers and reinsurers.
Thanks David. Your explanation makes sense if bud guy was talking direct companies vs reinsurance companies.
But I think he is talking direct writers vs independent agent companies and in this case I don’t see how a cat fund helps the direct writers any more than it helps the independent agent companies.
Icee