Rethink - FHCF decision clouds horizon for 'Sunshine State' reinsurers.

(From Reinsurance)

While 2006 was distinctly calm on the hurricane front, there was barely time to raise a glass to the final-quarter results before Governor Charlie Crist was whipping up a storm of his own in Florida and upsetting the (re)insurance industry. Analysts and reinsurers with even a passing interest in the Floridian property/catastrophe market were still lifting their jaws back off the floor when this month's Rethink opinion survey was carried out.

Although the industry was still smarting from the legislation, which will see the Florida Hurricane Catastrophe Fund (FHCF) increased twofold, it was only right that we asked how you thought it would pan out. While your comments suggest many of you see it as purely politically motivated, you also make clear that (re)insurers must shoulder a fair portion of the blame themselves.

In the aftermath of Mr Crist's announcement, three-fifths of you told us you believe that as a whole, reinsurance rates are falling, which is a significant increase on the previous two months' responses.

Opinion is clearly polarised, as optimism about the market is also slightly higher among you, with 16% of respondents under the impression that rates are rising. This left fewer respondents than last month believing that rates are stable.

Half of you expect there will be some correlation with the cost of reinsurance and the insurance cycle in 2007, while 31% of you said the two will be closely correlated.

When we asked you whether Mr Crist's decision to double the size of the FHCF would be the death of the sidecar, the response was a resounding "No" from 85% of you. Just 38% of you said the decision will cause property/catastrophe prices to tumble.