Sector Snap: Insurers/Reinsurers |
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Tue, 23 Jan 2007 18:10
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NEW YORK (AFX) - The legislation Florida lawmakers passed Monday seeking lower homeowners insurance rates may hurt reinsurers more than insurers.The Florida State Legislature approved a 100-page bill Monday cutting insurance rates for customers of state-run Citizens Property Insurance Corp., the biggest property insurer in the state.Following record hurricane damage in 2005, insurers raised property insurance premiums in the Gulf Coast, and some left the market. Florida legislators hope insurers will be forced to lower rates to compete with a state-run company selling cheaper insurance.Shares of insurers have fallen in anticipation of this legislation -- with Allstate Corp. down 3.5 percent, Safeco Corp. down 4.9 percent and St. Paul Travelers Cos. down 3.4 percent in the past four weeks.But Bear Stearns analyst David Small said the bill is more benign to insurers than people feared. The big insurers aren't trying to write more policies in Florida anyway, Small said, so the bill isn't much of a drag on the sector.Small said the losers in the legislation are reinsurers, who insure insurance policies. Florida proposes to increase the Florida Hurricane Catastrophe Fund, a safety net reimbursing insurers for some catastrophic hurricane losses, to $35 billion from $16 billion.A heftier public fund offers a lot of easy to find, cheap reinsurance to the Florida property insurance market, Small said. The legislation creates $19 billion in extra reinsurance capacity, Small said, leading to tighter prices for insuring policies.Reinsurers operating in Florida include Arch Capital Group Ltd., Renaissancere Holdings Ltd. and Partnerre Ltd.'The reinsurers could have to lower premium rates in Florida, hurting the profitability of whatever business is actually written,' Stifel Nicolaus analyst Meyer Shields wrote in a client note.The legislation will now be sent to Florida Gov. Charlie Crist for approval.Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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