COIN Reinsurance believes that the inevitable escalating rate hikes that hit insurance buyers due to loss adjustment and assignment of benefit (AOB) expenses can be countered by lower cost reinsurance for carriers.
COIN Re, a recently launched Florida focused and headquartered property reinsurance broker that has aligned itself with Beach Group, believes that by leveraging a different way of doing business, aligning the needs of the insurance cedant and broker with the ultimate insurance consumer, the costs of reinsurance can be lowered as a result.
Currently, Florida-based insurance consumers are facing rate increases due to loss adjustment expenses that have escalated and become inflated, as well as the issues caused by assignment of benefits (AOB) in the state.
"These late-breaking losses are collectively known in the trade as 'loss creep.' The factors contributing to it are not only affecting insurers and reinsurers, they are taking money out of the pockets of Florida homeowners," COIN Re CEO E.W. "Ted" Blanch said.
The influence these issues have on insurance rates for consumers can be mitigated to a degree by lowering the cost of reinsurance, COIN Re believes.
Blanch highlights the loss creep and loss adjustment cost inflation associated with hurricanes Harvey and Irma in particular as having had an influence on primary insurance rates.
"We've been seeing this AOB abuse in Florida for several years now and legislative action on this issue is long overdue," Blanch said.
But his company believes that both loss adjustment and AOB expenses will continue to drive adverse rate changes unless something is done to mitigate their influence on insurance prices.
"At COIN Re, we hope to slow down the acceleration of rate increases to consumers by lowering reinsurance costs to our primary insurer clients," explained Blanch.
COIN Re suspects that insurance rates will rise following the loss creep, loss adjustment costs and inevitable assignment of benefits claims related to the 2017 and 2018 hurricanes, hence its model of trying to lower the cost of reinsurance is a valid one to assist Floridian primary insurers in keeping their rates from spiking too much.
Of course, the expanding use of alternative reinsurance capital, from ILS funds through collateralized reinsurance and also through catastrophe bonds, has already been assisting by making reinsurance cheaper and more efficient for Florida's insurers for some years now.
COIN Re hopes that its model will tip the market economic of reinsurance back towards the ceding companies, which will enable them to help keep insurance more cost-efficient.
By achieving improved reinsurance program pricing and reduced frictional costs, as well as offering revenue distribution and equity value accumulation back to ceding insurance companies, COIN Re wants to develop a new broker-insurer relationship that could offer an interesting route to deploying capital for some ILS players who appreciate its approach.
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