Policy Documents

For the Catastrophe Bond Market, Nothing Could Be Finer Than Being in Carolina

Guy Carpenter –
January 1, 2012

The North Carolina Joint Underwriting Association and North Carolina Insurance Underwriting Association (NCJUA/IUA) is a residual market insurance company for homeowners and wind-only insurance coverage in the state of North Carolina. The NC JUA/IUA had experienced significant exposure growth in recent years after the voluntary market retreated from the coastal areas of North Carolina—even though the number of homeowners in those areas (and the replacement value of those homes) had increased. By May 2009, the NCJUA/IUA was purchasing USD1.4 billion of limit from the traditional reinsurance market and was becoming concerned about three key issues: 1. How much would it have to spend as its capacity needs continued to increase? 2. What was the potential year-over-year price volatility for its reinsurance program? 3. If a very powerful hurricane were to hit North Carolina along with Florida and the eastern United States, would the NCJUA/IUA be able to receive its full reinsurance recovery in a timely manner?