Sunday, April 30, 2006

The Premiums Were Supposed to Cover Something?

Besides CEO salaries and perks, extra money for shareholders. Shocked, just shocked to find out that they are taking their money and running away to safer ground. And where is that exactly? A place that has perfect weather, no geological faults, no tornadoes and no poor people?
Insurers Retreat From Coasts: "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 are also 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.

They propose establishing a greater role for the federal government in backing up new state catastrophe funds or private insurance firms when losses exceed a certain level, toughening state and local building codes and increasing premiums to accurately price risks. Some also want to potentially pool the high costs of covering perils such as earthquakes, hurricanes, tornadoes and even floods into regional or national groups to ease consumer cost, and to use some money to help improve first responders and local preparedness."
Oooh, I know. Let's create another FEMA. That should make us prepared for any eventuality.
Insurers are divided over whether such warnings are more Jeremiah or Chicken Little. As a whole, the industry is coming off some of its best years. It recorded a 12 percent increase in net income after taxes of $43 billion in 2005, despite the storms, according to the Insurance Services Office and Property Casualty Insurers.

What's more, up to half of the Katrina losses -- $38.1 billion -- were borne by overseas firms or reinsurers (insurers for the insurance companies), which say that growing capital markets are shouldering any growing burden.

"Our point is this industry has been very profitable and very resilient in the face of the most significant catastrophic losses -- both terrorist and natural disasters -- ever," said Frank Nutter, president of the Reinsurance Association of America, whose members would be supplanted by federal or state catastrophe funds or reinsurers. "We can't see why there's a case to be made for a government role."
Now where have I heard that story before? Hmmm, it looks like it is back to Grover Norquist's drown government in a bathtub way of thinking.

No wonder the rest of the world believes we have no sense of history.

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