T&T: New York hurricane

[trawlerphil]

(SNIP) If this were even remotely true then why do they have to jack their
rates up so high after every storm? Where's all that money they collected
before hand that was invested to make them more money. Thomas

Multi-line companies use what is called a "combined ratio".  If a company
has a combined ratio of 110 it means for every dollar of premium income they
bring in, they pay out $1.10 in claims which means their financial division
needs to sweeten the pot considerably to make a profit. It's easier to
understand the process on the life side of the business.  Over time, people
are living longer which affects the experience rating for things like
annuities where you bet you'll live longer than "average".

Rating agencies like A.M. Best weigh the financial health of insurance. A.
M. Best's rating is assigned after evaluating a company's financial
condition and operating performance both in qualitative and quantitative
terms. Quantitative evaluation examines (1) profitability, (2) leverage, (3)
liquidity, (4) reserve adequacy, and (5) reinsurance. Qualitative evaluation
is based on (1) spread of risk, (2) soundness and appropriates of
reinsurance, (3) quality and diversification of assets, (4) adequacy of
policy reserves, and (5) adequacy of surplus, (6) capital structure, and (7)
management experience. Ratings are reviewed both on an annual and a
quarterly basis.

The rating scale uses letter grades ranging from A++ (Superior), the
highest, to F (In Liquidation), the lowest. The letter grade can also have a
modifier that qualifies it. The A++ highest rating is based on a company's
favorable comparison of profitability, leverage, and liquidity with industry
norms; favorable experience from mortality, lapses, and expenses; quality
and diversification of investment portfolio; strong policy reserves and a
surplus to risk ratio that is above that for the average life insurance
company. Also examined are the amount and soundness of its reinsurance and
the competence and experience of management.

Therefore, what insurance companies do in terms of establishing rates is
usually driven by the same things the rating agencies use.  If Florida gets
hammered by 4 hurricanes in one year, you might find an insurance company
with dangerously low reserves, a problem they will attempt to correct as
quickly as possible.

The reason I only carry liability is I believe that too many boaters simply
don't care about making their boats able to survive a hurricane.  You see
boats in marinas with single dock lines, sails and biminis still up.  The
attitude is "why bother, I have insurance".  As the actual experience of
insurance companies gets worse, they react by raising the rates, which is my
point about "experience rating".

Al Golden can chime in here if I'm not making sense. Insurance companies
aren't always the bad guys.

                                          Regards....

Phil Rosch
Old Harbor Consulting
M/V "Curmudgeon" MT44 TC
Currently lying Bond Creek, NC