Monday, February 05, 2007

insurance





VHB wrote about earthquakes, and the pope wrote about older electrical problems making insuring homes an issue. But what about climate change, and the insurance risks around that?

I read an article (excerpted below) in the Glamour and Madness that spoke to that concern;

Insurers seek shelter from climate change

Jonathan and Katie MacLennan's new home...is a steel-reinforced fortress against nature.

It's the first of its kind in Canada and a symbol of what houses could be like in the future — at least, if insurers have their way.

The Canadian insurance industry, which is seeing weather-related claims soar, is considering how to cope with climate risks.
It might have been more to the point to ask how home-owners are going to cope with the insurance industry's concerns - it is, after all, we who will cope with the concerns through higher rates, or even the inability to afford the premia. Earthquake insurance can be very expensive, and some insurers will not even cover that liability.

The Pope wrote that some insurers will not insure older homes until their electrical systems are upgtaded to the current code (no pun intended). The rental that I live in has been given the word that the electrical panel must be updated within 30 days to continue the coverage (the house was built in the early 1950's).
Worldwide insurers' catastrophic losses have soared 20-fold in the past three decades. Last month, Lloyd's of London's chairman called climate change the “No. 1. issue” for the industry and said a $100-billion (U.S.) “mega-catastrophe” may hit anywhere on the Atlantic coast.

Canada's not immune. Three quarters of insurers' spending on disasters has occurred in the past decade alone.

Which means insurers are battening the hatches — calling for better building codes, preparing for catastrophes, making sure the language on policies is clear and emphasizing weather in their risk analysis. They're also diversifying into new areas, such as weather derivatives.
Reading between the lines, the insurance industry is calling for higher premia. Just when we started becoming hopeful of better affordability.
Swiss Reinsurance Co., the world's largest reinsurer, expects Canadian demand for natural catastrophic risk reinsurance will only grow. Insurers' interest in climate change has grown “dramatically” in recent years, said J.J. Henchoz, president and chief executive officer of Swiss Re Canada.

Which raises the thorny question of premiums. As regions become more disaster-prone, insurers may well jack up rates.

“I don't see swaths of Canada becoming uninsurable,” said Gregg Hanson, CEO of Wawanesa Mutual Insurance Co. “Nothing is uninsurable, it just might not be economical.... You can always get insurance if you pay a price.”

He sees high risk looming in low-lying, flood-prone areas, such as the Red River Valley in Manitoba, the Saguenay region of Quebec and areas of the Fraser River in British Columbia
Ooops - no need to read between the lines, just a need to read further.
Others say no region will be immune. “We're all at risk, and that's perhaps the most troubling trend we see,” said Kathy Bardswick, president and CEO of Co-operators Group Ltd., Canada's third-largest home insurer. “These events are happening everywhere.”

That's why her firm, which paid for the PEI project, is focusing on how to prevent damage in the first place.
So, are building codes going to become more stringent? What will this do to afforability?

Get your buckets of cash ready. "The System" is not through with rifling our pockets just yet. It might be a good idea to do your stretches - so that you can bend way over. And don't forget the lube.

2 comments:

bc_cele said...

I can just imagine some of the conversations of the addlepated house buyers on the Gulf coast

Husband: oh look dear, isn't this beach front property just to die for?

Wife: your right, I hear that there hasn't been a hurricane here in three whole years, well at least, none that were over Cat 3.

Husband: oh it's even better, it over looks that sandy cliff there.

Wife: that's just perfect, the lot will allow us to build it 10' back. Do you think we'll have a problem with erosion?

Husband: of course not, the shore line has been at this distance for no less than 6 months.

Wife: perfect, we'll get started on our 5000sq ft mansion right away.

And you wonder why it costs so much for insurance...

solipsist said...

bc_cele -

No doubt. Same goes for RE, beanie babies, and PS3's.

Bunch of morons.