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state scheme

D

DanielZ

Member
Hi

In chapter 21, page 5, the notes give the following example:

"Another example [of changes to the business operating environment] is where a state scheme is set up with an aggregate limit beyond which claims are passed on to all authorised insurers / reinsurers operating in the relevant state or market."

Can someone please clarify what scenario this example is describing? In this scenario, does the state pay for claims up to the aggregate limit, and then are all the insurers jointly liable for claim amounts above the limit? Would there be actual policies written & premiums paid in this scenario?

Thank you
 
In most examples I found, we get the inverse with the government being the payer of last resort (ex terrorism in the USA or Gareat in France).

However the Citizens Property Insurance Corporation (CPIC) seems to have a similar feature. CPIC is non-profit government owned that provides insurance protection to Florida homeowners that can't find it eslewhere (FloodRe anyone?). It is funded by premiums but if the surplus depleted, "Florida law requires Citizens to levy assessments on most Florida property-casualty insurance policyholders until any deficit is eliminated".

Yet this indicates that the levey is on policyholders rather than all authorised re/insurers operating in the state.

It would be great to know of such an example where the industry acts as insurer of last resort.
 
I agree that is more common for the state to act as the insurer of last resort and to set up a fund to pays claims which is based on a levy to authorised insurers writing the business concerned.

Examples would be:

  • Flood Re
  • Motor Insurance Bureau
  • Mesothelioma Bill
 
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