The Use of Postloss Financing of Catastrophic Risk

Cole, Cassandra R.; Macpherson, David A.; Maroney, Patrick F.; McCullough, Kathleen A.; Newman, James W. Jay; Nyce, Charles

doi:10.1111/j.1540-6296.2010.01190.x

Cited by 3 publications

(4 citation statements)

References 2 publications

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“…Insurers who write covered policies must enter into a contract with the FHCF and pay an annual reimbursement premium, as calculated by rules adopted by the Fund. For a complete discussion of the Florida residual market see Cole et al (Forthcoming) and Newman (2009).…”

Section: Rating and Regulationmentioning

confidence: 99%

Are Territorial Rating Models Outdated in Residential Property Insurance Markets? Evidence From the Florida Property Insurance Market

Nyce¹,

Maroney

2011

Risk Manage Insurance Review

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The fundamental shift in rating methodology from historical loss costs to catastrophe modeling for windstorm coverage calls into question the accuracy of rates developed using rating territories. Using premiums and modeled average annual loss (AAL) estimates from Citizens Property Insurance Corporation (Citizens) in Florida, this article analyzes the use of distance to coast (DtC) as a rating variable in providing coverage for the windstorm peril in homeowners insurance. Catastrophe models used to generate AAL costs do not rely on the same application of the law of large numbers as using historical loss costs and thus allows for more granular pricing of the windstorm peril. The results show that DtC, a rating variable that is property specific, more closely aligns premiums and AALs than territorial rating, and allows more granular pricing of the windstorm peril. More granular risk based pricing provides better incentives for homeowners regarding location and mitigation choices and may help reduce aggregate exposure to windstorm damages in the long run.

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Section: Rating and Regulationmentioning

confidence: 99%

Are Territorial Rating Models Outdated in Residential Property Insurance Markets? Evidence From the Florida Property Insurance Market

Nyce¹,

Maroney

2011

Risk Manage Insurance Review

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“…See Cole et al () for a detailed treatment of the subsidies across insurance lines and across time that are embedded within the state's postloss assessment system.…”

mentioning

confidence: 99%

Market Implications of Public Policy Interventions: The Case of Florida's Property Insurance Market

Medders¹,

Nyce²,

Karl³

2013

Risk Manage Insurance Review

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This article asserts that the market for property insurance, particularly homeowners insurance, in the State of Florida is experiencing failures, and that a combination of market problems, externalities, and interventions unique to Florida led to these failures. The authors provide evidence of market failures in the form of undesirable market outcomes, both over time and in comparison to other coastal states. Also, they provide a narrative description of the market events, problems, and policies preceding these adverse market developments and link the narrative to the evidence. Recommendations for a return to risk‐based pricing and incentives for appropriate property mitigation are made.

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“…Surcharge assessments from storm damage, which disproportionately represent coastal property owners, are covered by all residents insured within the state. Cole et al (2011) studied the subsidy payout per county and found an unequal distribution among counties. In it's current fiduciary relationship with the state all losses for FHCF and Citizens are covered by across the board insurance rate increases (property, auto, etc.…”

Section: Introductionmentioning

confidence: 99%

“…A microcosm of potential conflict for policy reform, the state has been "...widely considered the epicenter of the debate with respect to hurricane risk financing" (Cole et al, 2011;Grace and Klein, 2009). Florida currently makes up approximately 37% of all National Flood Insurance Policies (NFIP), which represents the largest share in force by the federally backed program (FEMA, 2014).…”

Section: Introductionmentioning

confidence: 99%

Household Preferences for Financing Hurricane Risk Mitigation: A Survey Based Empirical Analysis

Fitzgerald¹

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The Use of Postloss Financing of Catastrophic Risk

Cited by 3 publications

References 2 publications

Are Territorial Rating Models Outdated in Residential Property Insurance Markets? Evidence From the Florida Property Insurance Market

Are Territorial Rating Models Outdated in Residential Property Insurance Markets? Evidence From the Florida Property Insurance Market

Market Implications of Public Policy Interventions: The Case of Florida's Property Insurance Market

Household Preferences for Financing Hurricane Risk Mitigation: A Survey Based Empirical Analysis

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