Editorial - Sow the wind, reap the whirlwind.

(From Reinsurance)

Byline: Mark Geoghegan, editor.

Dear Friend,

I was going to say that the Florida Hurricane Catastrophe Fund news has dominated the headlines since we last spoke, but that wouldn't be strictly true, would it?

The news commentary on this weighty subject has arrived wedged in between the arrests at PWS International brokers in London by the UK's Serious Fraud Office, plus news of the launch of not one, but two insurance-linked futures contracts on recognised global exchanges, as well as the Bermudians' annual results season, and a whole slew of market and individual company estimates for the financial impact of Winter Storm Kyrill. There's no rest for us wicked reinsurance journalists!

Well, Governor Crist, the news storm may have been over, but now that the headlines have changed, you're truly on your own, at the mercy of the elements. I know you only want the best for your people and affordable insurance premiums are a big part of that, but there is a line that must be drawn between an optimistic hope for a better future and a blatant, wilful ignorance of a problem that is staring you and the people of Florida in the face.

Yes, it's a problem - but it's not an insurmountable one. It's quite simple, really. Your seven million households have cost insurers about $36bn over the last three years. Let's call that a straight $5000 a head. You think insurers were trying to recoup that loss too quickly because of cost being loaded on them in turn by the largely offshore reinsurance industry. So you called the Bermudians' bluff and stepped in to bring relief to the insurers on the condition that they pass the savings on to consumers. If the big one hits, you'll pay through bond issuance and insurance levies.