Wealth Mgmnt

Will Your Insurance Company be Around for the Next Disaster?

Hurricane Dorian was one of the most unbelievably tragic natural disasters of all time, causing loss of life and financial damage in the billions of dollars. Warren Buffett became one of the richest men in the world utilizing premiums received by his Berkshire Hathaway Insurance company. One has to ask the question if such premiums today will cover the catastrophic damages of tomorrow.

It’s convenient how the do-gooders changed the phraseology of “Global Warming” to “Climate Change.” That hedges their bet completely that whether the earth’s temperature rises or falls, they will be correct using the later terminology. Of course there is climate change. There have been five recorded ice ages that have come and gone without Leo DiCaprio ever flying his Gulfstream 5. The loudest mouth’s leave the largest carbon footprint (I hate that term). Let’s put that aside for a moment and look at the fake news (before we knew it was fake news) generated over the last several decades.

The Competitive Enterprise Institute has put together a lengthy compilation of apocalyptic predictions dating back decades that did not come to pass, timed as Democratic presidential candidates and climate activists refocus attention on the issue. The institute list includes, among other things, the following:

An Associated Press headline from 1989 read “Rising seas could obliterate nations: U.N. officials.” The article detailed a U.N. environmental official warning that entire nations would be eliminated if the world failed to reverse warming by 2000.

Then there were the fears that the world would experience a never-ending “cooling trend in the Northern Hemisphere.” That claim came from an “international team of specialists” cited by The New York Times in 1978.

In 1970, The Boston Globe ran the headline, “Scientist predicts a new ice age by 21st century.” The Washington Post, for its part, published a Columbia University scientist’s claim that the world could be “as little as 50 or 60 years away from a disastrous new ice age.”

And the latest green lemming who the state of New York has allowed to rise to congressional level, Rep. Alexandria Ocasio-Cortez, recently suggested Miami would disappear in “a few years” due to climate change. Okay, you get the picture. Well, at least half of you do.

Getting back to matter at hand, what is the future of the insurance industry, and will they be around when you need them. The industry is vast. Last year the premiums paid for property and casualty insurance worldwide reached $2.4 trillion, according to Swiss Re, one of the big reinsurance firms on to which consumer-facing insurers pass the risk of mega-losses. So that is the income side of the equation. Insurance companies spent $180 billion on reinsurance premiums.

So far so good for the insurers. Here’s the thing, if you look at the human migration in the U.S. you will notice that it is and has essentially been moving toward either the east or west coast over the last several decades. These are precisely the high danger zones that insurers are concerned with. What will they do? The worst case is that some fail and, more worryingly, that swathes of the U.S and the global economy become uninsurable. I have been a member of USAA for more years than I would like to say. In 2009, I bought a home in Mt. Pleasant, South Carolina near the Wando River, but several miles from the ocean.

To my surprise, USAA denied me coverage and told me that they no longer insured the area where I was living. Those that have the means who buy oceanfront McMansions, can self-insure to an extent, while the rest of us are anxious about getting coverage for our homes. Where risks become uninsurable, states and firms may have to work hand-in-hand. The federal government already backs flood insurance to keep premiums manageable. Perhaps general liability will be next.

Wealth Mgmnt