Insurers Retreat From Coasts

[RedEarth]

By Spencer S. Hsu
Washington Post Staff Writer
Sunday, April 30, 2006; Page A01

Alarmed at the sharply rising cost of hurricanes and other disasters, home insurers are pulling back from some U.S. coastal markets, warning of gathering financial storm clouds over how the United States pays for the damage of catastrophe.

The development is yet another legacy of Hurricane Katrina, whose mounting toll of destruction along the Gulf Coast has crystallized a growing industry debate about the combined effect of climate trends and population growth in coastal areas. Some believe the two are creating a risk of losses so large that insurers could be pushed to the breaking point, leaving the government and taxpayers holding the tab for the next disaster.

Since Aug. 29 -- when the hurricane made landfall along the Gulf Coast -- Allstate Corp., the industry's second-largest company, has ceased writing homeowners policies in Louisiana, Florida and coastal parts of Texas and New York state. The firm has stopped underwriting earthquake coverage in California and elsewhere. Other firms have pulled back from the Gulf Coast to Cape Cod, notifying Florida of plans to cancel 500,000 policies.

Meanwhile, homeowners are moving to state-backed insurer plans of last resort, which tend to be subsidized by taxpayers, and whose costs also are rising.

As companies raise premiums, shed customers and battle homeowner claims in hurricane-damaged states, an overhaul of the industry is being promoted by an unusual coalition. It includes Allstate and State Farm Fire and Casualty Co. as well as a bipartisan group of state regulators, academic experts and former homeland security officials

http://www.washingtonpost.com/wp-dyn/content/article/2006/04/29/AR2006042901364.html?sub=AR

[ixion]

1. Big Insurance lobbied to create mandatory insurance laws

so they could rake in. Now that they actually have to pay back some of the money they exhtorted, they run.

[Karmakaze]

2. LOL They are basically saying...

we wont insure anyone who is actually at risk. So save yourself some moeny - apply for an insurance policy, and if the company accepts you, you are probably so safe that you dont need the insurance anyway :)

[bigluckyfeet]

3. I Just Read These Creeps Are still Making Money

Even with all the money paid out for the last 2 hurricanes.

[Coastie for Truth]

4. More precisely - the casualty insurance company business model

1. Take the insured's money in return for an executory promise to pay for a "covered loss."

2. Deny the claim upon the occurrence of the "covered loss."

3. If the insured sues you - scream "tort reform" and "law suit abuse."

4. If the insured wins the law suit - run to the state for a bail-out.

PRIVATIZE PROFIT

SOCIALIZE RISK

[LiberalPartisan]

5. I can understand not insuring beachfront properties

If some fool wants to risk their money by building on a dune, which is what beachfront property is, then they should automatically be disqualified from any tax funded insurance plan.

[madrchsod]

6. here is why this is happening and who is benefiting

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B24A873DE%2D7689%2D4BBF%2DB1CF%2D2C5FAC628FA4%7D&siteid=google
New reinsurers sprout after hurricane devastation - MarketWatch

[havocmom]

7. Confimration that Global Warming is real

and really impacting the world NOW.

[kestrel91316]

8. Hey, this is a very good thing. Maybe in 100 years or so there won't

BE any more rich people's second homes on the beaches and they can go back to being, well, beaches. You know, with sand dunes and unique flora and fauna. And maybe they can even serve their original purpose - to halt erosion.

Could maybe be an upside. And the insurance companies won't have to keep paying for rebuilding rich people's second homes every time there's a hurricane or big Pacific coast storm during El Nino.

[IrishBloodEngHeart]

9. As someone who works for a major insurance company,

let me tell you, if we were allowed to charge a fair market price based on the actual risk involved, we would stay in the coast. Unfortunately, unlike any other product in the world, we have to get government permission to price our product.

So, the government won't let us charge what we think the cost of the product is, then we simply won't write it.

Current rates are based on old projections which do not take into account the current severity and frequency of the hurricane cycle. When you try to put in rate that does, the government won't allow it.

Why would we write something that we know is underpriced?

[IrishBloodEngHeart]

10. the other point is the poor and middle class end up

subsidizing the wealthy on the coast, because they control the political system in states like FL, TX, MS, AL, LA and they mandate rating plans that make people in poorer areas subsidize the wealthy in coastal areas.