Monday, January 7, 2008

Insurance industry gets ready to cut and run

At least this is how I read it. The expected earthquake on the west coast is expected to cause about $30 billion in damage, and the insurance industry is in for $6 billion. Do you think they want that hit?

This press release is a coded message to the government that they won't take it, and the taxpayers will be in for the whole lot. Unless, of course, something is 'arranged'.

This is a general trend of pulling out of earthquake insurance everywhere. It's too concentrated, and too much of a big hit, causing a liquidity problem. The same with big storms, but I can't see them getting out of that business, and still insure homes.

My prediction for the coming year is that we'll see a quiet exclusion of all earthquake risks in insurance policies. In the US, they have to declare that they are getting out of earthquakes, but in Canada, it will all be done under the table.

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