Disaster insurance: demand exceeds supply
According to the Wall Street Journal, the demand for disaster insurance far exceeds the current available supply, and this is affecting our entire economy. Companies and individuals are quickly buying disaster insurance, and the insurance companies themselves are scrambling to buy coverage of their own on the policies they write (known as reinsurance). Reinsurers have significantly raised their rates because of the volume of claims last year, and businesses and homeowners are feeling the effects. Hurricane Katrina caused almost $40 billion in insured losses, and about half of that was covered by reinsurers.
Rates have risen so significantly that companies are opting to cancel projects which require disaster insurance versus paying the extremely high rates. It seems the only people benefitting from the high rates are investors in insurance companies.
Tags: disaster insurance, reinsurance, Hurricane Katrina
