... and For Federal Protection From CatClaims Too?
Timing is everything. Two of the larger Property-Casualty Insurance Companies in the world chose Halloween to propose an unprecedented program to backstop their payment of CatClaims. Their proposal would limit the total amount of their payments for CatClaims or catastrophic damage claims caused by weather. At the same time, as previous posts and reports have addressed, they and the rest of the Property-Casualty sector, in fact, most of the Insurance Industry, announce record profits.
Not all Insurance Companies agree with this new two-prong proposal. They point out that Terrorism Claims, for example, have a Federal backstop because there is little history in this country of how terrorism affects the risk of payment for particular properties. Underwriters do not have enough information on which to base premiums and their Companies are in the dark about whether they can afford to offer Terrorism Coverage as a result. That is not the case with weather, they say. There are years of facts built up about CatClaims and how particular properties attract destruction and damage from Hurricanes and other weather-related causes.
In other words, Insurance Underwriters have always had the ability to calculate the risk of CatClaims. They had the ability before Katrina came, and they have the ability to calculate the risk of CatClaims now. If a particular Company does not want to underwrite the risk, these other Insurers point out, then that particular Company does not have to write the policy. That is the choice of each particular Property-Casualty Insurance Company -- and the reality is that those Property and Casualty Insurance Companies that decided to issue the policies made a large profit after all the Catclaims from Katrina were paid in 2005, and the sector will make record profits in 2006. That is what the Insurance Companies opposed to a Federal backstop for CatClaims Coverage are pointing out in another comprehensive news report by Joseph B. Treaster in "A Proposal for Federal Protection From Catastrophe Divides Insurers" (New York Times Nat'l Ed., page C1, col. 1, Tuesday, October 31, 2006).
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