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Insurance models

Discussions about the economic and financial ramifications of PEAK OIL

Insurance models

Unread postby Newfie » Thu 17 Mar 2011, 07:06:04

Clearly insurance companies are in the business of studying and understanding risk. So one would expect, in a rational world (ooopsie!) that these guys would be doing some cutting edge analysis on where and how the world is headed.

Given the failure of AIG and others a while ago that may well not be the case.

Does anyone know of, or have access to insurance company predictions on how the world economy will unfold and/or how global warming will effect their business.

Thanks.
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Re: Insurance models

Unread postby Crazy_Dad » Thu 17 Mar 2011, 07:20:40

I do not have any inside info as you ask for.

I can say what I think is going on though(Having worked for Lloyds in the past).

We are entering a sphere of re-insurance risk, which is beyond the business model of the status quo.

I remeber the lamentations of the '98 hail damage in Sydney, Australia(Last time I worked in the industry).

What is going on now with Australia, Pakistan, Japan and the rest must be breaking their business model big time.

My personal opinion is that the Insurance industry will not survive the coming years.
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Re: Insurance models

Unread postby Puchica » Thu 17 Mar 2011, 07:24:28

In buying business insurance, we had to assure the liability insurance carrier that we wouldn't engage in a variety of risky activities; our business ventures that had a slightly elevated risk (washing windows, for example) had either to be dropped or spun off. Similarly, we just took out a new homeowners policy; to get any coverage we had to tear out our wood stove, cut down oaks too close to house.
I don't know how they categorize risk, but I imagine they require assurances against risk. For Fukushima, I'm guessing they bought the plant owners assurances that all bases were covered, redundant systems, plant certified to stand up to any foreseeable quake, etc. I'm wondering how AFLAC is doing; I heard a report that a third of Japanese homes have AFLAC insurance. Whether thats casualty, medical or life, that has to be a large unforeseen hit.
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Re: Insurance models

Unread postby Crazy_Dad » Thu 17 Mar 2011, 07:54:42

Puchica wrote:In buying business insurance, we had to assure the liability insurance carrier that we wouldn't engage in a variety of risky activities; our business ventures that had a slightly elevated risk (washing windows, for example) had either to be dropped or spun off. Similarly, we just took out a new homeowners policy; to get any coverage we had to tear out our wood stove, cut down oaks too close to house.
I don't know how they categorize risk, but I imagine they require assurances against risk. For Fukushima, I'm guessing they bought the plant owners assurances that all bases were covered, redundant systems, plant certified to stand up to any foreseeable quake, etc. I'm wondering how AFLAC is doing; I heard a report that a third of Japanese homes have AFLAC insurance. Whether thats casualty, medical or life, that has to be a large unforeseen hit.


In the recent Australian floods, people who thought they were insured were not.

Apparently "Flooding" is due to rain falling from above and compromising the structure from above.
Rising waters were not covered. Stupid.
But this is how insurance works. If they actually paid out what they should have, they would have to file for bankruptsy.

In my state Western Australia, we are suffering from a drought. Big country. Yet it still rains over east.

We are also being subjected to the highest immigration levels in the world. How does that work?

Growth is 70/x to give you the number of years the population will double. We have a growth rate of 2.1 per cent.

So in just under 35 years we are expected to double our population, water resources, electricity needs et al. What a complete fucking joke.

Big business will sell more hamburgers, thats the only up side to the whole clusterfuck.
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Re: Insurance models

Unread postby joewp » Tue 22 Mar 2011, 18:58:35

Munich Re (if not the world's largest re-insurer, in the top 2) has an extensive treatment of climate change here -> Munich Re - Climate Change

They are fully on board, and are doing things with their business to change with the climate. Of course, not for altruistic reasons, but to make money. The stuff that Puchica is talking about actually comes ultimately from the re-insurers, who operate kind of like Fannie Mae and Freddy Mac, furnishing a secondary market so that insurers can lay off their risk. They set the parameters of the policies they buy, so that sets the parameters of the policies that the general insurers sell. Berkshire-Hathaway's General Re is also on board Berkshire Hathaway New Strategy (See slide 11), so at least the top 2 or 3 re-insurers in the world are thinking about it and implementing strategies for pricing insurance and conditions.
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Re: Insurance models

Unread postby Newfie » Tue 22 Mar 2011, 19:42:16

joewp,

Thanks. I had looked for some stuff but couldn't find anything. I presume that others are doing research also.

It kinda makes sense, considering that the insurance guys are 'professionals' in the risk management business.

I'll poke around some more when I get a chance.

Thanks again.
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Re: Insurance models

Unread postby joewp » Tue 22 Mar 2011, 21:49:52

No problem, Newfie. I had seen a program from the BBC on climate change a few years ago and the CEO of Munich Re was on there stating that they're well aware that AGW would affect their business and they were making preparations for it. Warren Buffet, CEO of Berkshire-Hathaway (owner of Gen Re and National Indemnity, another major re-insurer) said a few years ago:
What Warren said about climate change | Interactive Investor Blog
Buffett: I believe the odds are good that global warming is serious. There’s enough evidence that it would be foolish to say there’s a 99% chance it isn’t a problem. In this case, you have to build the ark before the rains come. If you have to make a mistake, err on the side of the planet. Build a margin of safety to take care of the only planet we have.


Buffet's partner in Berkshire, Charlie Munger, isn't as convinced (see the rest of the link), but it's pretty apparent that Buffet has the bigger influence on the subject with the several subsidiaries of Berkshire that write insurance.
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Re: Insurance models

Unread postby papa moose » Tue 22 Mar 2011, 22:07:26

joewp wrote:Munich Re (if not the world's largest re-insurer, in the top 2) has an extensive treatment of climate change here -> Munich Re - Climate Change



I think we've been pointed to this company before by someone at PO.com.
Out of curiosity i searched their site for "peak oil" and got 58 hits, most just reflect the popularity of the two words but several are actually discussing our favourite topic, including their annual report from 2004.
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Re: Insurance models

Unread postby Subjectivist » Tue 05 Sep 2017, 12:55:16

Talk about serendipity! People are arguing about flood insurance and this thread popped up in my feed. Is Google listening again?
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Re: Insurance models

Unread postby Outcast_Searcher » Tue 05 Sep 2017, 13:18:51

Newfie wrote:Clearly insurance companies are in the business of studying and understanding risk. So one would expect, in a rational world (ooopsie!) that these guys would be doing some cutting edge analysis on where and how the world is headed.

Given the failure of AIG and others a while ago that may well not be the case.

Does anyone know of, or have access to insurance company predictions on how the world economy will unfold and/or how global warming will effect their business.

Thanks.

They're using models. Their predictions are only as good as the models allow. Like the rest of the financial industry, clearly they were wrong to rely on the models that didn't see the real estate market blowing up the global economy.

The insurance companies have VERY smart people in droves as far as doing the math for probability and statistics to evaluate risk (AKA actuaries). In college, my calculus teacher told us that upon graduating with a math degree, we could likely pass one of the nine math tests needed to become an actuary. Maybe another one or two if we went on to get a masters or doctorate in math. For the rest -- primarily lots of home study, likely requiring hard work for a decade. (That's a HELL of a lot of math expertise, IMO).

But that doesn't mean insurance companies are smart. A few years back I had State Farm, where I've been a solid customer for 40 years, and my parents were for 20 years before that -- turn me down for insuring some collectibles. Why? Because the collectibles (Magic the Gathering playing cards I was selling over time) were HIGHLY volatile price wise. So much so, standard books were pretty much useless in evaluating pricing. Their underwriters flatly refused to utilize web based pricing, even when I put together a spreadsheet pricing the inventory, explained my methodology, documented several very good online store retail store web sites to document and confirm the prices and model, etc. I even offered to talk with them directly. No dice.

They just couldn't get their minds around accepting data from the web as the basis to price assets to insure.

Think about that. This was in 2014. Maybe every insurance company but State Farm is brilliant and futuristic thinking about data and models. Let's just say I have my doubts about depending on insurance companies as a great forward-looking source.
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Re: Insurance models

Unread postby Newfie » Tue 05 Sep 2017, 16:37:56

Since that early post I've learned that Munich RE participates at a high level in the World Ecnomic Form annual risk analysis. A few years ago I listened to one of their guys explain how Munich RE is working with in-named countries to reconfigure them r economies as an "insurer of last resort."

This was directly I response to the mounting load of risk the insurance companies Foresee due to climate change.

Yes, no crystal balls, but they can see the trend and it ain't good. They are not going to lay their cards on the table for their competitors to see. Also, early on Lloyds was a denier but has since reconsidered and is now in the same general camp as Munich RE.

Lloyds PDF on their modeling
https://www.lloyds.com/~/media/lloyds/r ... ate-v6.pdf

Munich RE feel good bit
https://www.munichre.com/en/group/focus ... index.html
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Re: Insurance models

Unread postby ralfy » Tue 05 Sep 2017, 21:17:50

"ClimateWise launches two reports that warn of growing protection gap due to rising impact of climate risks"

ClimateWise, a global network of 29 insurance industry organisations which is convened by the University of Cambridge Institute for Sustainability Leadership, has warned of the urgent need to address the growing $100 billion annual climate risk 'protection gap' in two new reports; Investing for Resilience and the ClimateWise Principles Independent Review 2016.


https://www.cisl.cam.ac.uk/business-act ... mate-risks
http://sites.google.com/site/peakoilreports/
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Re: Insurance models

Unread postby Newfie » Wed 06 Sep 2017, 08:41:19

Given they are talking 180+ billion for Harvey alone the 100 billion gap seems an underestimate.
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