While we all hope that Tower can weather the storm the biggest problem insurance brokers face is whether Tower can convince lending institutions and umbrella carriers to accept a B++ carrier when contracts call for A- or better. Some of our insured’s have already been contacted by their mortgage companies to replace coverage mid-term creating a huge amount of extra work for us. Umbrella carriers are also letting us know that they will no longer accept Tower paper for underlying coverage.
This latest statement by the Carrier doesn’t give much hope. What it shows is how the leadership is scrambling. Clearly an attempt to buy time while they try to pull the ripcord on the parachute right before impact.
That is the danger of having a rating drop below A-. Many counter-parties will not accept the paper. Any word on if they are able to arrange cut-through or guarantee endorsements with their reinsurers?
These kind of situations rarely end well. A death spiral of the carrier no longer being acceptable to many of their insureds and having those insureds drop their coverage, while expenses and claims continue to come in. I don’t see where these guys are too big to fail as was AIG and I see a country bailout weary even if they were.
While we all hope that Tower can weather the storm the biggest problem insurance brokers face is whether Tower can convince lending institutions and umbrella carriers to accept a B++ carrier when contracts call for A- or better. Some of our insured’s have already been contacted by their mortgage companies to replace coverage mid-term creating a huge amount of extra work for us. Umbrella carriers are also letting us know that they will no longer accept Tower paper for underlying coverage.
I don’t see any path to a safe landing.
This latest statement by the Carrier doesn’t give much hope. What it shows is how the leadership is scrambling. Clearly an attempt to buy time while they try to pull the ripcord on the parachute right before impact.
That is the danger of having a rating drop below A-. Many counter-parties will not accept the paper. Any word on if they are able to arrange cut-through or guarantee endorsements with their reinsurers?
These kind of situations rarely end well. A death spiral of the carrier no longer being acceptable to many of their insureds and having those insureds drop their coverage, while expenses and claims continue to come in. I don’t see where these guys are too big to fail as was AIG and I see a country bailout weary even if they were.
I believe the run on the bank has already begun. The horse has left the barn. The stain has set in. The next news will be receivership.
I too think they will meet all obligations–when they take into consideration the g. Funds. Not a problem.