Monday, September 12, 2005
Swiss RE Estimate Of Katrina Cost
Behind the scenes what is going on is that the insurance companies are not liable for flood damage, but they are liable for wind damage. This is going to amount to a windfall for lawyers, because is water driven by wind a flood loss or a wind loss? It's well established that if your roof gets ripped off and rain pours in your house that is wind damage and is covered. However flooding is not covered, and hasn't been even for storm surges.
Expect some major political negotiations on this one. The states involved are pulling out all the stops to try to get as many claims covered as possible. However, they can't push too far or property insurance will become too expensive in these areas for many people to purchase, which will mean that banks can't lend to rebuild, which will have its own repercussions. The federal flood insurance program is certainly going to take a fearful hit.
What has happened in Florida is that many homeowners now have very high deductibles and some have had trouble even getting insurance at all. I don't think that most businesses will rebuild substantial properties in New Orleans unless they have a high-ground location. I don't think they will be able to get adequate insurance to do so. Also, insurance companies will be seeking to raise premiums across the board to cover this and other similar anticipated losses.
The costs all around will be high, almost as high as those dang waters. Thanks for coming by earlier Maxed out Mama :)
Yeah, that's what reinsurance is for. But they'll have to rebuild their reserves, and that's why everybody's rates will tend to sneak up.
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