Coming into 2014, we had modest expectations of the potential for significant property insurance reform in Florida. Given that it is an election year – and one featuring the return to prominence of our old friend Charlie Crist, that notorious wrecker of the state’s insurance market – we knew that proposals to address the core problem of rate controls were unlikely to get much political traction.

That’s why we worked with the James Madison Institute to publish a paper on ten reform proposals for Florida that WOULDN’T require rate increases. And we were heartened that one of them – perhaps the easiest and most obvious of them all – was embraced by Florida Hurricane Catastrophe Fund Chief Operating Officer Jack Nicholson — take advantage of the incredibly soft global reinsurance market to transfer some of the Cat Fund’s tail risk off the backs of taxpayers.

Alas, recent headlines suggest Nicholson has put his plan for the Cat Fund to buy $1.5 billion of private reinsurance on hold, and there may not be enough time to place the coverage before Florida’s renewal season closes (just as the North Atlantic hurricane season starts) on June 1.

What makes this news so incredibly disappointing is that there literally has never been a better time to take advantage of pricing for property catastrophe insurance. Just look at the recent $3.2 billion placement by Japanese insurer Zenkyoren, just one piece of what is now a record $10 billion catastrophe reinsurance for the massive mutual. Insurance Insider noted that the placement comes “as pricing slides double digits.”

As expected, the pricing on the lower layers was far softer than the excess layers as Zenk and broker Aon Benfield pushed reinsurers up from the higher rate on line (RoL) lower layers.

The pure RoL on the 220bn yen xs 270bn yen combined quake and wind layer was 18 percent weaker at 9.8 percent on line. The new merged layer above this – which triggers in excess of a 100bn yen private layer – is paying almost 12 percent less premium at 6 percent on line.

The bottom line is, in today’s market, capacity supply is far outpacing demand. The world’s largest reinsurers mostly closed out 2013 with underwhelming earnings reports, due almost entirely to poor pricing opportunities. To keep investors interested, companies have resorted to returning capital to shareholders, because there simply aren’t enough opportunities to deploy that capital in the marketplace. Swiss Re is bumping up its proposed earnings dividend, while Munich Re – which is projecting a 9.1 percent drop in 2014 earnings – plans to buy back 1 billion euros worth of shares before its 2015 meeting.

That’s all capital the Cat Fund could be taking advantage of to lever up its claims-paying capacity and reduce the odds of needing to borrow money later, financed through special post-storm hurricane taxes. Alas, it looks like, once again, the State of Florida is going to opt instead to cross its fingers and roll the dice that 2014 won’t be the year that brings the long-awaited budget-crushing storm on shore.

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