Expensive, one way or the other… Interesting how Reuters is slanting the ‘message’…
FRANKFURT/MUNICH, Jan 9 (Reuters) – Hurricane Ian in the United States and floods and Australia helped to make 2022 one of the costliest years on record for natural disasters, Munich Re said on Tuesday, warning that climate change was making storms more intense and frequent.
Full article, HERE from Reuters.
But, a bit more, shall we say, even handed coverage from Town Hall.
According to Reuters, Munich Re is complaining bitterly, along with several other pre-imminent international re-insurers. about its massive weather-related losses during the calendar years 2021 and 2022.
The role of re-insurers in the insurance market is simply to back-up the many standard casualty insurance companies, that may wish to deal off part of the potential liability from catastrophic losses (mega-claims) filed by their policy holders, who may sustain economic damage from one of a variety of natural occurrences.
Full article, HERE.
The expensive part is when the re-insurers back out of markets, making it impossible for the majors like State Farm, Allstate, Farmers, et al to spread the potential loss. It basically leaves the insurer in a no win situation, to the point that they will probably drop ALL coverage in that state/geographic location.
The states are also caught in a Catch-22, in that they can only raise rates so high, either through legal means, or try to take out more insurance themselves (good luck with that).
When that happens, people are forced to go without insurance, or try to find ‘somebody’ that will sell them a policy at who knows how much per month…
For the rich that live in places like Amelia Island, Kiawah, or any of the other waterfront areas up and down the coasts, they’ll pay it. The problem is the service people that live close to there, that feed the rich, run the businesses that service them, and the restaurants, etc. that populate the ‘cheap’ side of the island. They won’t be able to protect their assets.
Bottom line, it’s a no win for the little people… again… sigh
While their complaints are probably accurate, I bet there is more to the story.
A couple things come to mind:
– How are higher crime rates affecting their income? While the big disasters make the headlines, I bet there is a steady flow of claims for smaller “incidents” that add up to at least as much as the big news items.
– They invest their income in many places to grow it while waiting for claims. The downturn in real estate and stock markets, increasing taxes and regulations, etc mean that they have less money available to deal with big and small claims.
– I’ve read about state sponsored fraud by countries such as North Korea that have hit reinsurers hard in the last decade. Things like claiming a ferry sank with large loss of life but refusing the insurer access to investigate for themselves, leading to payouts in hundreds of millions.
I’m sure that rising costs are a bug part of the reason for their complaints…
Read the prophecies in the Bible and understand the natural disasters will increase before the return of Jesus Christ. If you think 2022 was bad, fasten your chin strap because they will increase and it will get much worse in the future. Oh and by the way this is because of the sin in the world and the people turning away from Christ.
I’ve seen where huge geographical areas in Texas were basically shut down to most homeowners due to insurance costs. FEMA wouldn’t allow any claims after the initial disaster, unless the property owner kept insurance they couldn’t afford. Many just took the claim money they could get and left the homes on the property to rot away. Entire neighborhoods became ghost communities filled with rotting structures.
I can’t find fault with insurance carriers for all their actions. It’s all about the odds and their willingness to bet on future claims. Expecting them to take losses without adjusting their ability to stay in business isn’t a logical expectation. I can find fault with their adjusters, failure to pay claims, and general bureaucratic methods of screwing those that buy their policies.
Jon- Excellent point! I hadn’t looked at ‘that’ perspective.
John- You do have a point!
Jess- That they did, and they use actuarial tables for a reason.
It would help a lot if one could insure one’s house for something other than 80% of the rebuild cost. Particularly older houses that have very high rebuild costs due to materials/craftsmanship, but may have low actual resale values.
In my own case, we would never ever rebuild what is here (1800s, Shingle Style, on the National Register no less). There is no point, you couldn’t ‘recreate’ it. It is definitely not worth the rebuild price on the market, it might be about a third of the value. But the insurance cost is based on the rebuild price…
ACH- Good point. And as those ‘values’ go up, the costs of insurance go up right with them… sigh…
Insurance.
I understand actuaries aren’t too pleased about excess “sudden death.”
Insurance also encourages people to build in stupid places. Prior to insurance a beach side home was way back from the beach least a storm wash it away. If you want to build in a stupid place, then pay stupid insurance rates but don’t penalize me.
And I agree with Jonathan, there is always more than meets the eye. Fraudsters go where the money is.
Our close proximity to the border usually have the car insurance excuse for auto theft into Mexico. One way or the other, companies are using loopholes to avoid paying out as much as possible.
I remember as a teenager, my Dad making a claim for roof damage (built-up roof had developed a crack along the roof ridge) at the insurance office. Allstate agent seemed upset that we were making a claim and threatened to cancel the policy.
Dad replied “Why am I paying an insurance premium then ? I’m not paying to put braces on your kids teeth for free.” Note that the agent had not even seen the damage, nor did they take into account Dad had that policy for over a decade and had never once made a claim until then.
Caveat: I did not read the article
“2022 one of the costliest years on record for natural disasters,”
Is that of course adjusted for inflation
Does that account for more people living in danger zones every year
Does that account for the fact that people have mor expensive things to fix/replace
There are always a lot of of confounding variables in reports like this whenever you hear “Most XXXX ever”