It’s the law in Nevada that a casino has to have enough money to pay off every bet in that casino. That is, if every single chip and bet were to be called in at once, they have to have enough cash on hand to pay it off. For the slot machines, the casino has to have $1,000 per .01-.50 machine, plus $1,800 per $1 slot, and $5,000 each for slots of higher denomination. The idea here is that the casino needs to be able to pay the obligations it incurs by losing its bets.
Banks have laws that require them to have a certain amount of funds in reserve. All banks with more than $124.2 million on deposit must maintain a cash reserve of 10% of deposits. Banks with more than $16.3 million but less than $124.2 million must reserve 3% of all deposits.
So when I see a story telling me how a Florida insurance company, faced with having to pay out hurricane claims, is going to use insolvency as an excuse to get out of paying, it boils my blood. These companies are in turn owned by other companies, and the use that structure to move money from one place to the other to avoid having to pay out claims. They collect billions in premiums for decades and send that money off to their parent companies, then when they have to pay out a large number of claims, they claim to be cash poor.
Perhaps the state needs to make sure that there are more cash reserves required to do business as a Florida insurer. United Property and Casualty had about 135,000 policies in Florida. That means they are collecting at least $150 million a year in premiums in Florida alone. It claims to have losses of more than $35 million each year since 2017. The thing is, it is owned by a larger company, United Insurance Holdings Corporation. That company was making $10 million a year in profits until 2018.
6 Comments
nones · February 19, 2023 at 7:24 am
Probably after hurricane Andrew (’92?) national insurance companies divided their businesses into 50 individual state insurance companies. Here in Florida 2% doesn’t go very far meanwhile 98% of their assets are north of our border and “unavailable”. And fuck Joe Biden
Joe Blow · February 19, 2023 at 10:16 am
There is also a whole business of re-insurance: insurance compsnies insuring other insurance companies – talk about re-hypothecation! Genworth financial, GNW, don’t touch it with a 10 foot pole, unles its short.
Further evidence of 2 things:
1 its all a house of cards, and will come crumbling down.
2 its a big club, and YOU ain’t in it! (- Saint G. Carlin)
Jonathan · February 19, 2023 at 3:42 pm
At some point, coastal properties will revert to shacks or self insured mansions for lack of insurance… How long that will take, I don’t know…
Reinsurers have been hammered in recent years, mostly by escalating costs, but also by outright fraud – by several entities, most spectacularly North Korea. It’s yet another sign that the global financial system is creaking badly enough to not rely on long term.
Barefoot Peckerwood · February 19, 2023 at 12:04 pm
If that was me…the law.of unintended consequences would bite those insurance companies. Just set the example and the rest will learn.
Don in Oregon · February 19, 2023 at 12:19 pm
When insurance companies say they’re losing money, they mean they’re paying out more in claims than they’re taking in in premiums.
They deliberately obscure their investment income from the “float”, the money they make on the cash they hold between the time of receipts and expenditures.
Divemedic · February 19, 2023 at 5:57 pm
There is a reason why 90% of the world’s supertankers are owned by insurance companies
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