Mar 2006

And thy name will be Alberto.

Mr. President,
Huricane
That's the name the World Meteorological Organization assigned to this year's first tropical storm. Brace yourself America, last year's onslaught of hurricanes pretty much guaranteed we would have to open up our checkbooks.

GlobalWarming

This year's hurricane season will reopen the argument by some people that global warming has nothing to do with the intensity or frequency of hurricanes. But focus junior. Regardless of what is causing them, the immediate issue is that hurricanes will be more intense and the insurance companies are betting on it.

NOAA's National Weather Service said this hurricane season will be another good year for plywood and a bad year for insurance premiums.
noaaa
NOAA is not alone. The weather models calculated by RMS, a world-leading provider of products and services for the "quantification and management of catastrophe risks," stated "U.S. Hurricane Activity Rates will increase 40% in Florida Gulf Coast, 25-30% in the Mid-Atlantic and Northeast coastal regions." They expect these losses to persist for at least the next five years.

stormtrack_2005b

When major storms hit, people die, homes and crops are swept away, and hunger will prevail in hard hit countries. Billions of people are under threat of mother nature's wrath from the sea.
hurricane beach
Australia has already been hit with two big storms. The most recent storm named Glenda, a category-four storm, made landfall on Western Australia just over a week after Cyclone Larry battered Queensland on the east coast with 180 mph winds. It wiped out farming towns, flattened banana and sugar cane plantations.

Financial institutions are ready this year. The World Bank said on Thursday "climate change is likely to significantly affect economies in the Asia-Pacific region, threatening the increasingly industrialized coastal belt and hurting the region's poor."

Hurricane Katrina

"Rising sea levels, more intense storms and greater extremes of droughts and floods will probably cause greater loss of life and threaten the livelihoods of millions; the Bank said in a report."

Insurance companies around the world including US companies like Berkshire Hathaway Inc. understand the risks as well. They were hit with almost $100 billion in insured losses over the past two years. Berkshire Hawthaway has boosted rates or dropped coverage after the hurricanes hit.
dollarsign
U.S. insurers have seen a 15-fold increase in insured losses from catastrophic weather events in the past 30 years. These humongous increases have far out-stripped growth in premiums, population and inflation over the same time period.

European companies such as Munich Re and Swiss Reinsurance Co., two of the world’s largest reinsurers, have long noted the increasing risks associated with climate change.

insurance policy

This is how I understand insurance companies work. Customers pay a premium for the privilege of betting on disasters taking place; while insurance companies take the yearly premiums and bet disasters won't happen. The premiums are based on the odds of the disaster occurring plus a handling charge of sorts.

The odds are calculated along the same lines Vegas bookmakers use to set up the odds on sporting events.
roulette
The last few years the insurance companies have been on the wrong side of that bet.

They bet on "no significant storm damage" and they lost big. The premiums they collected were insufficient to pay for the huge weather-related pay-outs.

This year they are hedging their bets by either increasing insurance premiums or refusing to insure high risk areas.

Mother nature may not get the best of them again, but we will all pay to hedge their bets.

Gasoline, natural gas, real estate taxes, education, mortgage rates, food, and now insurance premiums are all up. Everything seems to be up except the average middle-income American's ability to pay for it all.

Let the good times roll!



Everyone is waiting for the other shoe to drop. Who will be the next person to leave for personal reasons?

Replacing Andrew Card with Joshua Bolton's was really a non-move, since they are almost clones of each other.

Speculation is running amok, but I'm betting there will be a Snow removal.
John Snow

I did not receive the normal thank you for writing auto-response from the White House.