Summary
Managing expectations of shareholders, managers or finance directors is not easy, especially when a third party removes a significant part of your premium base at a stroke.
Analysis
Nobody likes to be under budget- if you take away my premium base I need some of yours to make my budget. The Florida Legislation will increase pricing pressure in the reinsurance industry.
At this stage in the year, everyone knows that what is important is the exposures, the rates on line and the ability to assess the risk properly. Unfortunately the figures that get published are the premium volumes. The disappearing premium creates a shortfall against premium budgets in month 1. Nobody likes to see red ink.
Managements have 11 months to make up their shortfall. All over the world affected reinsurance teams will be considering how to do this, maybe not even consciously. Inevitably it will increase pricing pressure on the next round of renewals not only for this class, but across other lines of business too.
