Insurance Policies Falling Into The Drink
by John Laumer, Philadelphia on 05.11.06
With the 2006 hurricane season near, we expect that the US broadcast media will soon re-launch last fall’s controversy over whether global warming is causing more intense hurricanes to make landfall. Underlying that long-term scientific question lies a fiscal reality that has undeniable and immediate traction. Last month a USA TODAY article reported that: “With the 2006 hurricane season starting in just five weeks, many home insurers from Texas to Florida to New York are canceling policies along the coast or refusing to sell new ones out of fear of another catastrophic storm…In Florida alone, insurers that are undercapitalized or fearful of losses have notified the state of plans to cancel more than 500,000 homeowners policies…Allstate says it won't write any new homeowners policies in New York City, Long Island or Westchester County. Although Long Island hasn't been struck by a major hurricane since 1938”.
Besides cutting prospective loss in highly developed areas with a statistical history of hurricane landfall, what else is the insurance industry up to? Might they be actively lobbying for increased energy efficiencies? Or, supporting incentives for renewable energy development? Not really. But, anything else that might help stem fiscal loss is on the lobbying table. “ProtectingAmerica.org is working to raise awareness, educate the public and policymakers, and offer solutions that will better prepare and protect America from major catastrophes in a sensible, cost effective fashion. As a key to that effort, the [insurance industry supported] coalition is working to enact federal and state legislation that provides for a comprehensive, integrated solution that includes more protection at a lower cost for consumers through a privately funded, government sponsored nonprofit catastrophe fund”.
The situation seems well characterized by Warren Buffett's annual letter to shareholders, which was reported to explain "that while the cause behind the more frequent and intense hurricanes remains “an open question,” the company must err on the side of caution and assume there will be more extreme weather in the future".
This seems to be the logical risk management “baby step” away from the State insurance commissioner’s report . Insurers will assume that more intense storms are the norm going forward, but will stay out of the causal analysis debate.
We wonder, then, what bankers and other lenders will say to coastal developers and mortgage applicants if the 2006 season is again a damaging one? 'Pop goes the bubble', could be one plausible scenario for how that will go.
Obviously, homes built out of harm’s way should get preferential loan treatment and insurance terms. But, what we’re really waiting for is that dawning awareness that a home designed to be less carbon intensive in both its materials and operating efficiency and which also is out of harm’s way is the one that deserves the most favorable incentive of all. Come on insurance people. Lets wake up and look at the weather.
via: http://www.oneatlantic.net/
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The rest of y'all that don't live on one of the southern or eastern coasts may think you're out of harm's way, but what about tornadoes? Or ice storms, heavy snowfalls, floods, lightning or wind-storms? You are not out of harms' way when it comes to the weather.
Now, if the insurance companies would instead go after developers that build shoddy homes and don't build for strength in those areas of the continent that are prone to weather disasters, they wouldn't be having to cancel policies. If Hurricane Rita had hit Houston last year, you can bet every home built in the last ten years would have been flattened. And with the developers writing the laws regarding their quality of construction and their liability for such, builders like Perry Homes would have gotten away scott free.
Why should I be penalized for living where I have lived all my life? This is my home; I'll leave when the weather changes permanently force me to. For the moment I can choose to evacuate or not and live in an older building built when skilled labor was the norm. I would say that it is more "obvious" that homes built by skilled labor and intelligent developers/contractors deserve to get the loans and insurance.
Heh, one day they'll only allow Buckydomes out there :)