Hurricane Charley's Teachings

The charge of the disaster should be distributed among insurers, reinsurers and the compensation fund set up by the state of Florida following hurricane Andrew.

However, no sooner has the initial fear begun to wither away, a general mood tending to play down hurricane Charley crept into people's minds.

There can be no way to understand such an attitude unless we refer to the market's recent history seriously marred by the 2001 September-eleven attacks, the stock market crash and the companies' fear to see their financial strength under the scrutiny of rating agencies.

Since 2003, most of the companies that came to grips with the crisis have managed to reconstruct their margins and to set up their risk distribution mechanisms that are likely to protect them from disasters of Charley's scale.

The outstanding recovery of the market was achieved solely thanks to the draconian underwriting policy adopted by reinsurers, the hardest-hit of the players by the crisis, who have obviously been on the frontline.

To survive in the first place and to develop later on, insurers have resumed insurance basic principles, that is, risk selection, risk price and risk management.

Today, Charley comes in a time when the market has been cleaned up, and where stakeholders have set up efficient distribution and follow-up systems for their natural disasters commitments.

In fact, hurricane Charley has made it possible to gauge the financial strength of a system and the capacity of the market to absorb exceptional disasters.

Charley reminds insurers to consolidate recovery and to remain vigilant.

As usual, the big insurers' stance will be decisive as far as the future of the insurance business is concerned. The next Monte Carlo congress will be an excellent barometer to gauge future evolution.