Granted, the insurance industry may not be as charming as high-tech, investment banking, advertising, or Hollywood. After all, the most influential publication that takes into account property and casualty insurance is ibnr weekly (IBNR means where it appears but is not reported, it is the art insurance clause for long-term bulk capital reserves). So, we have no shame on the comments about “California Wildfire Loss, Net or Hair”? The purpose of this note is to peel off the onion layer and explain why alert information about insurance industry health betrays the dynamics of complex industries.
There is a lot of noise that declares the California insurance market to be threatened or collapsed by survival. Distinguished New York Times Holding on “The Possible Crash of the American Home Insurance System” Insurance business in the United States Say the end of the world called “doomsday”? Is the insurance industry about to collapse? “and Senate Banking Committee A hearing was held recently and a report on “A report next to the fall: The climate-driven insurance crisis is getting worse here.” Unfortunately, public perceptions of the health of the insurance industry are often influenced by such alarm declarations. The reality is that the financial situation of the insurance industry is shaped by factors such as:
- Reinsurance recycled
- Insurance company retention level
- Subsidiary and non-affiliated reinsurance companies
- Reinsurance recovery
- How many events have occurred
- Net and total
Infiltrating the above six insurance companies’ health drivers may not be as good as stimulus New York Times Best-selling romance novels, but they are factors used by analysts and regulators to identify insurance and individual insurers, especially California.
Reinsurance recycled
Insurance companies practice risk management to protect their balance sheets. They protect their balance sheet by calculating the cap to understand the losses they can reasonably make before their capital base is significantly affected. They determine the maximum possible loss (PML) based on past losses and expected losses. Above this, they present risks for reinsurers so that the maximum possible loss (MPL) is calculated even if the actual loss is higher than the PML. It considers the worst possible scenario. If the main insurance industry is the first financial responder of the economy, then the reinsurance industry is the impact absorber of insurance companies.
The reinsurance industry is global. half Industry $500 billion in capital is held by the four major European continents – Munich RE, Switzerland RE, Hannover RE and SCOR RE. The majority of the rest is held by Bermuda Reinsurance and is distributed among Lloyds United, American Reinsurance (particularly Berkshire Hathaway’s State Compensation Company) and the Far East (Japan, South Korea, China). Major insurance companies spread their risks globally. In exchange for payments to reinsurance companies, the insurer will limit the risk or limit the reinsurance companies. A large insurer (such as farmers) actually extends its risk to 128 reinsurers around the world. This enables the spread and diversification of risks. Reinsurance companies also practice risk management by taking only a small portion of the risks that major insurers ceded to them in order to avoid overexposed to any one huge disaster loss.
Reinsurance companies also have reinsurance. This is called backflow reinsurance, and in the company’s reinsurance company (reverse transcription machine), the CEDES risk is towards the reloader risk. Reverse transcription lenses include hedge funds such as De Shaw and several Lloyds’ groups.
Insurers attribute most of their risks to reinsurers and reinsurers, converting them into a backflow market strengthens the protection wall of insurance companies’ balance sheets. So when people hear that California wildfires could hit $28 billion in insurance losses, the reality is that the reinsurance industry is taking most of the burden. The $28 billion is the total amount; after the insurance company recovers the amount of losses borne by the reinsurer, the amount paid by the insurance company is the net.
In addition to protecting insurance companies through reinsurance companies (called “traditional” reinsurance), there are also capital provided by “alternative” reinsurance providers, mainly in the form of debt instruments in the form of insurance chain securities, A/K//K/ /Disaster key or cat key. Cat Bonds are funded by third-party investors who view disaster risks as diversified games, because disasters have nothing to do with the capital market.
Insurer retention and recovery
The highest amount that an insurance company will determine before reinsurance begins is the “attachment point”. Reinsurance payment is triggered when the loss pierces the insurer’s attachment point. If the loss is large enough, the insurer will boast through its retention rate, on its panel, the risk of the reinsurer (its list of reinsurance counterparties) is above. If the loss is too large to exceed the limit of reinsurance, it may return to its original state, just like reloading the pistol. Major insurers received a second help with reinsurance coverage in exchange for insurance companies to pay premiums for the restored insurance tier.
Affiliated or non-affiliated reinsurance company
Large National Insurance Group operates with complex merger arrangements. For example, the insurance company was a company within the farmers’ group in the mid-century. Nearly half of its business, 44.5% is California risk, while 50% is homeowners. It raised $2.5 billion and provided $2.5 billion to inter-company swimming pools. It also attributes more than 100 non-affiliated reinsurers to insurers including Europe, Bermuda, London and the United States
One or two events
After the 9/11 terrorist attack on the World Trade Center, whether the damage to the two towers was one event or two events. This is important because insurance restrictions may apply “every time” or “total”. Similarly, there may be debates as to whether California wildfires are one event or multiple events. This will be an important difference. For example, General Mercury’s Disaster Reinsurance treaty Allows to combine loss events that occur within a 150-mile radius into a single occurrence.
Analyst There is a tendency to think that California wildfires will not curb reinsurance results this year. This is largely attributed to the high reinsurance attachment point when huge losses were caused a few years ago. Besides the few California-focused insurance companies, the largest insurer for homeowners in California is the largest national. To be sure, unlike Florida’s high-leverage insurance companies, nine of the top 10 homeowner insurance companies in California are state farms, farmers, CSAA, Free Mutual Aid, Free Mutual Aid, Allstate, Allstate, Auto Club, Auto Club, Travelers, American Family, Chubb – is a giant national that benefits from a collection arrangement among affiliates and dozens of non-affiliated reinsurance rivals.
If all of this sounds complicated, it’s because it’s. However, having a transitive understanding of complex markets is important to avoid having to explain the marks TweenHe corrected a newspaper that published the author’s sue when he was still alive “my death report was highly exaggerated.”
theme
Disaster Natural Disaster California Profit Loss Wildfire
