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Insurance Costs

Discussions about the economic and financial ramifications of PEAK OIL

Re: Insurance Costs

Unread postby Outcast_Searcher » Mon 21 May 2018, 14:31:52

Newfie wrote:The point of the thread is to look at insurance companies and follow their decisions. If CC is a real threat then the insurance companies will likely be the one to first identify and quantify the risk.

What happened with Buffet is not very relevant.

Agreed. For one thing, Berkshire is insuring a hell of a lot more than flood and hurricane damage. Looking at the overall results without drilling down to the topic at hand is pretty meaningless.

Frankly, looking at Florida, for example, I'm increasingly surprised we don't already see howls of outrage from customers (wanting taxpayers to bail them out) due to increasing costs of insurance for coastal properties. As SLR continues and accelerates, it's only a matter of when that happens.

A quick search reminded me Bloomberg predicted that scenario about a year ago.

https://www.bloomberg.com/news/features ... homeowners
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby Newfie » Fri 01 Jun 2018, 17:55:48

From Reuters

Florida catastrophe reinsurance rates rise only slightly: JLT Re
LONDON (Reuters) - Reinsurance rates to cover property catastrophe damage in hurricane hotspot Florida rose only slightly at June 1 renewals, despite record losses in 2017, broker JLT Re said on Friday.

JLT Re said rate increases were seen in the low single digits, an increase it called “negligible” and some way below market expectations.

The broker said demand from investors to put money to work in the reinsurance market remained strong, with dedicated reinsurance capital at record levels.

“Pricing for Florida property-catastrophe business remains 40 percent down on 2012 levels and only 13 percent above the previous cyclical low of 1999/2000,” it said in a statement.

Reporting by Simon Jessop; editing by Lawrence White
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Re: Insurance Costs

Unread postby jawagord » Sat 08 Feb 2020, 13:29:24

Insurance losses down for 2019. But doomers should still worry as climate change is “taking its toll”, yes down is still up!

Total economic losses from natural and man-made catastrophes fell to around USD 140 billion in 2019 from USD 176 billion last year, according to preliminary sigma estimates from Swiss Re Institute. [Global insured losses are estimated to be around USD 56 billion, down from USD 93 billion in 2018 and below the annual average (USD 75 billion) of the previous 10 years. Tropical cyclone activity in the second half of 2019 pushed overall insurance losses higher after a benign first-half of the year. And, as in recent years, a number of smaller and mid-sized loss-generating disaster events (so-called secondary perils) accounted for more than 50% of the insured losses.


https://www.swissre.com/media/news-rele ... imate.html
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Re: Insurance Costs

Unread postby Outcast_Searcher » Sat 08 Feb 2020, 16:05:17

jawagord wrote:Insurance losses down for 2019. But doomers should still worry as climate change is “taking its toll”, yes down is still up!

Total economic losses from natural and man-made catastrophes fell to around USD 140 billion in 2019 from USD 176 billion last year, according to preliminary sigma estimates from Swiss Re Institute. [Global insured losses are estimated to be around USD 56 billion, down from USD 93 billion in 2018 and below the annual average (USD 75 billion) of the previous 10 years. Tropical cyclone activity in the second half of 2019 pushed overall insurance losses higher after a benign first-half of the year. And, as in recent years, a number of smaller and mid-sized loss-generating disaster events (so-called secondary perils) accounted for more than 50% of the insured losses.


https://www.swissre.com/media/news-rele ... imate.html

If you think insurance losses for one year have any real meaning re the trend, you're dead wrong.

The question is what happens over the coming DECADES. And given the trend of the past 5 decades or so, and how little humanity is proactively doing re reducing the level of GHG's produced, the outlook is anything but good.

Eyeballing the summary data from NOAA, the big hurricanes dwarf everything else. And the overall trend over the past 4 decades re real dollars in damage is sobering.

https://www.ncdc.noaa.gov/billions/events
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby rockdoc123 » Sat 08 Feb 2020, 17:20:09

Roger Pielke Jr summarized the results of Munich Rey and AON analysis of disaster and weather losses not that long ago. The pattern suggests decreasing losses which has to do with the fact that although there is more infrastructure at risk man has figured out how to gradually mitigate against damages

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Re: Insurance Costs

Unread postby jedrider » Sat 08 Feb 2020, 19:39:08

In California, I think my fire insurance has roughly doubled from a bit over 1K per year to now over 2K per year for a dwelling probably insured for 600K to rebuild (the rebuild would be welcome actually, but the house is nice as it is, even if some parts of it are quite old).

Every year there are big fire losses in California and the rates are jacked up.
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Re: Insurance Costs

Unread postby Newfie » Sat 08 Feb 2020, 19:54:58

About Munich are...

A couple of years ago they had a high official represent them at a Davos Risk Assessment seminar and the Munich Re guy stated that the upcoming losses due to climate change were beyond the ability of the insurance industry to provide adequate insurance. He said that role would fall to governments as “insurers of last resort”. He also stated that Munich Rs was working with open minded governments to adjust their finances to provide these kind of protections to their citizens.

At that time Lloyd’s was not recognizing any overt CC hazard, but that changed about 2 years later when Lloyd’s started to publish warnings about CC losses.
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Re: Insurance Costs

Unread postby rockdoc123 » Sun 09 Feb 2020, 00:56:24

Newfie, not arguing with your anecdotal information but what Pielke used in his plots comes directly from Munich Re statistics.
I'm a data guy so I'll take that over someone's impressions any day of the week.
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Re: Insurance Costs

Unread postby Outcast_Searcher » Sun 09 Feb 2020, 04:11:26

rockdoc123 wrote:Newfie, not arguing with your anecdotal information but what Pielke used in his plots comes directly from Munich Re statistics.
I'm a data guy so I'll take that over someone's impressions any day of the week.

No doubt such data is better than anecdotal information.

OTOH, I'm a follower of Warren Buffett, who is a big time insurance expert, re how much insurance business (and time) his Berkshire Hathaway has. One thing he has repeatedly pointed out in his annual shareholder letters is that various property/casualty insurance companies seem to get complacent or engage in short term thinking re having high enough rates to cover LONG TERM losses (vs. trying to get more short term business), if claims have been small for a number of (recent) years. And after 9-11, he was forced to admit that he had GREATLY undervalued the possibility of a major terrorist event re certain reinsurance business, and that Berkshire's insurance companies would have to reevaluate some rate structures/policies in light of that.

With all the problems/debt/expenses governments have to deal with in coming decades, like aging demographics ALREADY, I think it's a VERY dangerous game for huge insurance companies to just ASSUME that if they don't charge realistic rates to deal with climate change risk that government will just swoop in and eat the industry losses and bail everyone out.

They might, as moral hazard IS now a very bad habit government has gotten into re bailing out financial organizations (to secure voter loyalty). OTOH, they might NOT, since such insurance companies and all their actuaries certainly SHOULD be able to see the problem coming at them like a giant train. Also, people having to switch property/casualty companies (if some go under) is a COMPLETELY different kettle of fish than their life savings being wiped out in a financial panic.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby Newfie » Sun 09 Feb 2020, 10:36:45

Rock,

Two points.

First he is looking at this as a percent of GDP, which has been grossly inflated due to monetary policy.

Second he is looking at past trends.

The Munich RE guy was looking into the future, attempting to predict what WILL happen in a changed world. Basically his argument would run along the lines of saying the historic data presented are correct but that the future trends will be different.

And he was reporting in the context of the “Global Risk Assessment” a forward looking annual report on the upcoming challenges.

Here is the 2020 version, which I have not read yet.

https://www.weforum.org/reports/the-glo ... eport-2020
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Re: Insurance Costs

Unread postby Outcast_Searcher » Sun 09 Feb 2020, 14:16:17

Newfie wrote:First he is looking at this as a percent of GDP, which has been grossly inflated due to monetary policy.

Why do people keep saying GDP has been "greatly inflated" due to monetary policy.

Both global and US GDP have been rather subdued for the past decade, as have inflation rates. Neither suggest a greatly inflated anything, overall.

If anything, the money printing went into stabilization after a huge misallocation of capital that caused the entire globe to swoon -- re the real estate debacle.

As economies get big, the long term trend is for GDP growth to slow. When looking at countries like the US, China, India, etc., I'd say that's what we're seeing as a trend. When you look at the world overall, the trend in GDP per capita is one of deceleration, over time.

https://ourworldindata.org/economic-growth

Re this "grossly inflated" claim I keep seeing tossed casually around on this site (re claim, not well supported data / facts), WHERE'S THE BEEF?

Let's remember that aside from frantic arm waving by the doom patrol over a 4 month adjustment late last year, that net over the past couple years, the Fed balance sheet has been meaningfully shrinking.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby Newfie » Sun 09 Feb 2020, 16:19:35

I say that because the GDP now contains a lot of “service” industries that are of marginal value.

I know that is not conventional thinking, but it’s my thinking.
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Re: Insurance Costs

Unread postby Outcast_Searcher » Sun 09 Feb 2020, 16:39:07

Newfie wrote:I say that because the GDP now contains a lot of “service” industries that are of marginal value.

I know that is not conventional thinking, but it’s my thinking.

Thanks for that explanation.

The GDP is composed of goods and services that people want. Whether you or I think they are of "marginal value" or not is pretty irrelevant re the state of the overall economy.

The world is changing a LOT due to tech. Look at how many services, including posting at this website are purely part of "service" industries.

I think, respectfully, that to claim GDP is "greatly inflated" because the world is changing due to technology, and people are spending their time differently, just doesn't make a lot of sense -- given the consumption being REPLACED by those services.

If, for example, it means less driving, consuming physical goods, etc, then on a world with lots of bad problems showing up due to resource constraints -- it seems to me that this trend is actually a VERY GOOD THING. (The worst aspect of that is it takes energy to run things like phones and computers, but it takes a hell of a lot LESS energy than to manufacture traditional physical goods, ship them, dispose of them, etc. Oh, and less of many physical goods. And if we can green up energy a lot, maybe that energy consumption will be rather inconsequential.)

OTOH, if we're building thousands or even tens of thousands of satellites over the next decade(s) to ensure the world is heavily blanketed with dense, omni-present WIFI, for example -- the overall infrastructure to provide such services -- even if they are consumed by billions for decades, is hardly trivial, and I certainly acknowledge that aspect of the cost of services over time.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby jawagord » Sun 09 Feb 2020, 17:28:03

Outcast_Searcher wrote:
rockdoc123 wrote:Newfie, not arguing with your anecdotal information but what Pielke used in his plots comes directly from Munich Re statistics.
I'm a data guy so I'll take that over someone's impressions any day of the week.

No doubt such data is better than anecdotal information.

OTOH, I'm a follower of Warren Buffett, who is a big time insurance expert, re how much insurance business (and time) his Berkshire Hathaway has. One thing he has repeatedly pointed out in his annual shareholder letters is that various property/casualty insurance companies seem to get complacent or engage in short term thinking re having high enough rates to cover LONG TERM losses (vs. trying to get more short term business), if claims have been small for a number of (recent) years. And after 9-11, he was forced to admit that he had GREATLY undervalued the possibility of a major terrorist event re certain reinsurance business, and that Berkshire's insurance companies would have to reevaluate some rate structures/policies in light of that.

With all the problems/debt/expenses governments have to deal with in coming decades, like aging demographics ALREADY, I think it's a VERY dangerous game for huge insurance companies to just ASSUME that if they don't charge realistic rates to deal with climate change risk that government will just swoop in and eat the industry losses and bail everyone out.

They might, as moral hazard IS now a very bad habit government has gotten into re bailing out financial organizations (to secure voter loyalty). OTOH, they might NOT, since such insurance companies and all their actuaries certainly SHOULD be able to see the problem coming at them like a giant train. Also, people having to switch property/casualty companies (if some go under) is a COMPLETELY different kettle of fish than their life savings being wiped out in a financial panic.


I would think a Buffet follower would be familiar with his comments from a few years back (yes I posted it here 2 years ago)?

Berkshire Hathaway CEO Warren Buffett on Monday said he has not yet seen sufficient evidence that climate change is affecting weather events to a degree that would make him change the way his conglomerate's insurance businesses write policies.

Events such as Hurricane Sandy have raised concerns that global warming is increasing the intensity and frequency of so-called superstorms.

"I have not seen anything yet that would cause me to change the way we look at evaluating quakes, tornadoes, hurricanes by atmosphere. Now, that may happen some day," he told CNBC's "Squawk Box."

He added that the frequency of Florida hurricanes has been "quite low" for roughly the last decade compared to historical trends, and storms in the Sunshine State, Texas and the U.S. Southeast have been "remarkably benign."

Buffett delivered a similar assessment in last year's annual letter to shareholders. In that letter, he said climate change had not up until then "produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance."

https://www.cnbc.com/2017/02/27/warren- ... e-biz.html
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Re: Insurance Costs

Unread postby Outcast_Searcher » Sun 09 Feb 2020, 18:22:38

jawagord wrote:Buffett delivered a similar assessment in last year's annual letter to shareholders. In that letter, he said climate change had not up until then "produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance."
[/i]
https://www.cnbc.com/2017/02/27/warren- ... e-biz.html

So let me guess. In your world, CO2 levels aren't rising?

Glaciers aren't melting at a dramatic rate?

Global temperatures aren't rising as a trend?

The climate of Venus has nothing to do with a (relative to earth) very high concentration of CO2 in its atmosphere? (Hint: Science says it very much does).

And if SLR causes much more storm / flood damage in the future, Buffett will NEVER change that assessment?

Per your posts, you don't seem to be a climate change denier. Wouldn't you expect the effects of SLR to accelerate (including insurance costs) in the future, given the trend of the overall data?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Insurance Costs

Unread postby Newfie » Sun 09 Feb 2020, 19:51:58

Outcast,

Some new technology has real and intrinsic value.

But that does not extend to all the internet twitter and flutter. We lived fine without it and will live without it once again if pushed. The same can not be said about steel or aluminum.

The good thing about this conversation is you are making me think about stuff in a more concrete manner. Explain myself.

So if we loose a steel krill then we loose the products produced by it. If we loose the gaming industry or the music industry we loose their products but we can simply revert to playing cards, telling stories, and singing to one another. (Except me, I can’t sing).

So it’s not quite right to value all of the dollars traded equally. And anymore there are a lot of really low vale dollars being traded.

You get the last post then we need to either start a new thread or drop it because we are way off topic.
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Re: Insurance Costs

Unread postby derhundistlos » Tue 11 Feb 2020, 10:21:25

"Berkshire Hathaway CEO Warren Buffett on Monday said he has not yet seen sufficient evidence that climate change is affecting weather events to a degree that would make him change the way his conglomerate's insurance businesses write policies."

I retired as a Senior Vice President for one of the world's largest risk management consulting firms. My responsibilities included reinsurance rate and capacity forecasting.

Perhaps this was Buffet's personal opinion a few years ago; however, to claim the insurance industry is not apoplectic over AGW is absolute bunk. The reinsurance market is reeling from catastrophic property losses, particularly in 2016 and 2017 when US (not global) insured losses exceeded $150 billion!!!!! Losses for just these two years depleted reserves to such a critical extent that immediate capital infusions were necessitated. The market is now reflecting a consensus that property losses will continue to escalate in terms of both frequency and severity. The big reinsurance markets like Munich RE have issued sobering, while others say frightening, modeling forecasts that read like a dystopian Hollywood movie screenplay. I enjoy kidding my successor by saying better him than me.
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Re: Insurance Costs

Unread postby Newfie » Tue 11 Feb 2020, 11:25:07

I wonder what the corona virus will do to health care insurance?
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Re: Insurance Costs

Unread postby jawagord » Tue 11 Feb 2020, 11:58:01

Outcast_Searcher wrote:
jawagord wrote:Buffett delivered a similar assessment in last year's annual letter to shareholders. In that letter, he said climate change had not up until then "produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance."
[/i]
https://www.cnbc.com/2017/02/27/warren- ... e-biz.html

So let me guess. In your world, CO2 levels aren't rising?

Glaciers aren't melting at a dramatic rate?

Global temperatures aren't rising as a trend?

The climate of Venus has nothing to do with a (relative to earth) very high concentration of CO2 in its atmosphere? (Hint: Science says it very much does).

And if SLR causes much more storm / flood damage in the future, Buffett will NEVER change that assessment?

Per your posts, you don't seem to be a climate change denier. Wouldn't you expect the effects of SLR to accelerate (including insurance costs) in the future, given the trend of the overall data?


Future Insurance claims/rates isn’t really the issue. Thinking we can forestall extreme events like hurricanes, floods, droughts, wildfires by stopping the use of fossil fuels isn’t logical. These events have always happened, it is inevitable that they will happen again in the future and the only protection humans have is to prepare for them, not sit back and hope they do not happen.

Barak Obama’s election did not “slow the rise of the seas”. The 100 billion dollars in grants and subsidies he gave out to green energy schemes did not protect New Yorkers from hurricane Sandy. Hubris won’t save us, engineering will, build sea walls, build storm surge barriers, build dikes, build dams, build irrigation systems, if you live in a dry forest area better put a non flammable roof on your house! Extreme events are not preventable, but the damage done by them is. That’s how you control insurance rates.

Many coastal cities are experiencing subsidence greater than sea level rise which means they are becoming more vulnerable to storm surges regardless of what effects you think are coming from climate change. Coastal cities need to do a better job of preparing for storm surges by building 1 in 1000 event barriers like the Dutch have done.

Humans with Stone Age technology survive sea level rise of 120m so I’m not worried we have an existential threat to humanity from future sea level rise of 0.5m over the next 100 years. In the past 4000 years sea levels have gone up and down by 1-2 m and we’re still here. Long term people will move if a place becomes inhabitable, it’s what humans have always done.

https://www.houstonchronicle.com/news/h ... 445243.php

https://www.investors.com/politics/edit ... nd-e-cars/

To make matters worse, many coastal areas are sinking even faster than the waters are rising: Natural and human-driven subsidence rates arising from shallow processes can be one to two orders of magnitude greater than the rate of climate-driven sea level rise predicted for the remainder of the 21st century (Figure 1).

https://eos.org/features/global-risks-a ... subsidence


https://en.wikipedia.org/wiki/Meltwater ... _Level.png

I was very interested in trying to understand how people in the past dealt with some of the same issues that we’re grappling with in our present life — mainly sea level rise,” McFadden told The Washington Post.] “One of the things that I did learn during my research is that environmental change on the coast is a normal part of life, or it certainly was for the people in the past.

“So as the sea level came up, they probably had ingrained in their culture these strategies and a knowledge that eventually they were going to have to move back away from the water,” McFadden said.[i]


https://www.washingtonpost.com/news/ene ... ise-today/
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Re: Insurance Costs

Unread postby Newfie » Tue 11 Feb 2020, 12:08:18

Nav,

Above you somewhat alluded to a part of the problem with human acceptance of the issues we face, although I don’t think you see it yourself.

Subsidence is now a problem and the root cause is generally over drawn fresh water supplies caused by excessive human population.

SLR is a problem that we will face in the future that will add to the subsidence problem.

Beyond subsidence aquifers are being overdrawn across the globe, call it fossil water. While the water supplies can sometimes be recharged the recharge rate is vastly longer than the drawdown rate. We are drawing down these water supplies, and depleting top soils, in a effort to feed 7.8 billion people.

Even without climate change human population demands are depleting the food and water sources we rely upon to survive. Climate change will only make those difficulties worse.

It’s not CC, it’s the conjunction of all the various difficulties we are bringing upon ourselves. And it does no good to fix any one if the others remain, at best it may just buy some time.
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