Posted on 09/05/2007 12:31:12 PM PDT by Between the Lines
Insurance companies are like bookies. They lay off part of the possible liability to re-insurers. Insurance companies never take the full hit from something such as a hurricane or a twister.
Florida gave the insurers a break on re-insurance...hoping they’d lower their rates because of it and pass the savings along to the consumer, but they just used the windfall to buy more re-insurance from their parent company (at least that’s what State Farm did.)
If a company buys re-insurance from its parent company isn’t it failing to off set any of the liability for the parent company. I don’t see an advantage to the parent company of entering into such an arrangement.
Here’s the article that explains their practice of buying reinsurance from their parent company. It’s under the heading “What’s Fair”
http://www.sptimes.com/2007/07/15/State/Muddy_waters_of_reins.shtml
Thank you.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.