In Nature’s Casino

It was Aug. 24, 2005, and New Orleans was still charming. Tropical Depression 12 was spinning from the Bahamas toward Florida, but the chances of an American city’s being destroyed by nature were remote, even for one below sea level. An entire industry of weather bookies — scientists who calculate the likelihood of various natural disasters — had in effect set the odds: a storm that destroys $70 billion of insured property should strike the United States only once every 100 years. New Orleanians had made an art form of ignoring threats far more likely than this; indeed, their carelessness was a big reason they were supposedly more charming than other Americans. And it was true: New Orleanians found pleasure even in oblivion. But in their blindness to certain threats, they could not have been more typically American. From Miami to San Francisco, the nation’s priciest real estate now faced beaches and straddled fault lines; its most vibrant cities occupied its most hazardous land. If, after World War II, you had set out to redistribute wealth to maximize the sums that might be lost to nature, you couldn’t have done much better than Americans had done. And virtually no one — not even the weather bookies — fully understood the true odds.

Full Article

The Insurance Hoax

Property insurers use secret tactics to cheat customers out of payments--as profits break records.

Julie Tunnell remembers standing in her debris-strewn driveway when the tall man in blue jeans approached. Her northern San Diego tudor-style home had been incinerated a week earlier in the largest wildfire in California history. The blaze in October and November 2003 swept across an area 19 times the size of Manhattan, destroying 2,232 homes and killing 15 people. Now came another blow.

Full Story

Could Hurricanes Blow Subprime Debt Investors Away?

What happens if large-scale hurricane losses arise when securitized debt markets are tanking or seizing up? Might reinsurers be required to fund claim payments at the same time they face losses and illiquidity in their investments?

In 2005, hurricanes Wilma, Rita, and Katrina wreaked devastation in Florida, New Orleans, and much of the Gulf Coast. Insured losses set a record for a single year. Catastrophe reinsurance providers took a significant hit, but they generally stood behind their promises to pay catastrophe claims.


The Link