One of the things I love about my work is that there is a certain beauty in watching the patterns of correlation and interrelationship among different rating and underwriting variables, as well as certain aspects of the larger marketplace.
(Why yes, I am strange.)
For example, in a Palm Beach Post story discussing changes being debated for the Florida Cat Fund to reduce future post-storm assessments, one can find this comment:
“When we laid on that $12 billion in additional risk last year, our bond people felt that the market could absorb making up these deficits,” Sink said. “If we had a big storm event today, we probably would not be able to issue that amount of bonds in a timely enough way to cover the claims of our citizens.”
The fund’s advisory council notified Sink, Crist and Attorney General Bill McCollum last month about its “collective concern” that the subprime mortgage meltdown and its impact on financial-market liquidity has hurt the bond market. The council recommended lawmakers reduce the fund, which has about $3 billion cash on hand, or risk “a significant shortfall.”
True, it’s an ugly situation, but a casual observer wouldn’t normally think about how fallout from delinquent risky mortgages could impact what a homeowner pays for hurricane coverage. It’s cool in a financially geeky kind of way.
For whatever it’s worth, I applaud the powers that be for the changes that are being considered. Adding a bit of financial realism to the playing field is a good thing, even if the effects might promote a little additional indigestion.
I still think, however, that the policy-makers could have come up with a more sustainable / less onerous program if more creativity had been exercised on the funding of the thing.