Securitization for HURRICANE risks ABOVE the Hurricane Storm Surge water line.
"If I couldn't differentiate between wind and water, I could NOT pay", said adjuster Matthew Thiele.
The final version said "When the investigation indicates that the damage was caused by excluded water and the claim investigation does not reveal independent windstorm damage to separate portions of the property, there is NO COVERAGE available under the homeowners policy.
So where is the "Transfer of risk" through securitization.
What was the "credit" taken on liability balance sheets or off balance sheets for this transfer of risk?

Would a balance sheet credit be taken (say in the securitized HO policy of Bossier) for:
a) $2,300 (the initial payment loss)
b) $93,480 (the supplemental payment 4 years later)
c) $650,000.00 (the full policy limits)

S&P rate Alpha Wind 2000-A Ltd's $90 million
These HURRICANE securities provide $90 million of retrocessional coverage to ARROW RE, a wholly owned Bermuda reinsurance subsidiary of Goldaman, Sachs & Co. Arrow Re has reinsured a $100 million portion of an excess-of-loss treaty covering STATE FARM Group (State Farm) policies, primarily homeowners, in Florida. This securitization represents a 90% cession of that risk to the holders of the securities.
The analysis included estimated losses for buildings, contents, additional living expenses, and an allowance for demand surge, the additional cost of building materials that often follows a hurricane.
Securityholders are subject to payments dependent on the triple-'A' rating on Swiss Re as guarantor of the total return swap counterparty (and, thus, asset guarantor), the unrated Arrow Re as the weak link in a chain of agreements leading back to State Farm, and the outcome of the peril modeling.
Alpha Wind has put the security proceeds into a collateral account with Bank of Bermuda Ltd as indenture trustee and invested in HIGH-QUALITY ASSETS whose final maturities may not exceed 15 years.
The collateral account supports State Farm's reinsurance (through Arrow Re) of certain insured hurricane losses in Florida.
Under the retrocessional agreement, Alpha Wind is bound to follow the fortunes of Arrow Re with respect to its payments to State Farm under the reinsurance contract.
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