As The Hurricane Damage Tally Begins, Here Is Who Pays

Tyler Durden's picture




 

While it is too early to estimate the ultimate losses wreaked by Hurricane Sandy in the last 24 hours, we thought it useful to start gauging relative exposures and which companies are the most exposed. As it stands, Hurricane Katrina remains #1 of all US Catastrophes as the most-costly at $46.6bn (2011-equivalents) with 9/11 second at $38.5bn; with the worst MTA disaster in its history and the relative wealth in the areas affected, one can't help but feel like Sandy could be up there. The P&C insurance industry will bear the brunt of personal and corporate losses (as well as federal relief we pre-suppose) and is better capitalized than in the past but as JPM notes, initial estimates of losses tend to be revised upwards. The most exposed insurer is State Farm with an 11.4% share of all potential liability lines in the states impacted, followed by Allstate and Travelers. We finally note that when the P&C industry experiences losses of this magnitude, it typically leads to increased pricing for an extended period of time (as they rebuild capital bases).

The Top 10 Most Costly Catastrophes

 

The Most Exposed P&C Insurers

 

and Hurricane Irene Re-Insurer Losses

 

Source: JPMorgan and Goldman Sachs

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Tue, 10/30/2012 - 08:57 | 2930948 CPL
CPL's picture

Were the adjusters out there en masse last night?

 

Only people I seen were reporters.

Tue, 10/30/2012 - 09:29 | 2931050 fuu
fuu's picture

They were all hanging out with the flash mob at Times Square.

Tue, 10/30/2012 - 09:30 | 2931056 eclectic syncretist
eclectic syncretist's picture

So when the insurers jack rates up on the entire eastern seaboard that will provide a huge boost to the economy, right?

Tue, 10/30/2012 - 10:07 | 2931197 Vince Clortho
Vince Clortho's picture

from the Central Planner's Handbook: " ... Never let a natural disaster go to waste."

It may not boost the economy, but it most definitely Will boost the net worth of a certain select group of people.

 

Tue, 10/30/2012 - 10:40 | 2931328 larz
larz's picture

ask tok1 - from the broken windo fallacy responses, seems to know all about it

Tue, 10/30/2012 - 09:48 | 2931110 Stoploss
Stoploss's picture

Good luck getting coastal insurance after this.

The central planners better hurry up and get into the insurance biz, cause anything within 50 miles of the coast will be uninsured for future storm damage.

They like to leave out those little details until after the fanfare blows over, then, in six months or less, we will hear about how nobody in NY can get property insurance with storm coverage. Been there and done that.

Welcome to the club, New York.

Tue, 10/30/2012 - 09:58 | 2931145 agNau
agNau's picture

Wonder...what assets will require selling to payout claims?.....
Yo Bennie,.....remember those wet dreams you've been having about really stepping up the printing?......

Tue, 10/30/2012 - 09:00 | 2930953 firstdivision
firstdivision's picture

Turn those machines back on!

Tue, 10/30/2012 - 11:53 | 2931584 Diet Coke and F...
Diet Coke and Floozies's picture

LMAO

Tue, 10/30/2012 - 09:05 | 2930964 malikai
malikai's picture

I'm not so familiar with the way insurers operate. Does anyone in the business know what insurers tend to hedge with? I.e. What will they be selling to meet the claims?

Tue, 10/30/2012 - 09:07 | 2930975 scatterbrains
scatterbrains's picture

they'll be selling you higher premiums to pay for this mess.

Tue, 10/30/2012 - 09:19 | 2931007 ptoemmes
ptoemmes's picture

Already doing/done that in Florida.  Getting expensive to live here though I can only imagine the cost of living in the Northeast before and now after.

Tue, 10/30/2012 - 09:16 | 2931009 malikai
malikai's picture

Not me, I'm not a buyer. But I'm sure everyone in the region will get to pay the higher premiums.

Tue, 10/30/2012 - 09:28 | 2931044 GeezerGeek
GeezerGeek's picture

What this article needed was a way to use a webcam on the reader's computer to render an image of the reader onto the web page. Somehow or other, the costs will ultimately be borne by we, the people. Since the article did not contain such a capability, and since not everyone has a webcam on, I suggest that readers - at least US readers - simply go look in a mirror and say "Somehow, I'm going to pay."

Tue, 10/30/2012 - 13:44 | 2931971 Dburn
Dburn's picture

+1 for new iAPP idea . In the interim,  How about photographs of the possesions that readers will have to sell in order to meet their new financial obligations, with special prizes for the biggest tear jerkers and of course special worthless points awards good for redemption in Zynga Games for those who show good  taste in lighting and perspective. 

Tue, 10/30/2012 - 09:17 | 2931010 flacon
flacon's picture

Reinsurance - if an insurer can't pay they get insurance from another insurance company. 

Tue, 10/30/2012 - 09:28 | 2931047 JPM Hater001
JPM Hater001's picture

Bingo...More below on that.

Tue, 10/30/2012 - 09:24 | 2931033 CPL
CPL's picture

Higher premiums for Everyone!

 

Yay!

Tue, 10/30/2012 - 09:10 | 2930988 moonstears
moonstears's picture

CDSs? Thus JPM, MS and GS, too in the mix?

Tue, 10/30/2012 - 09:19 | 2931011 malikai
malikai's picture

That's what I want to know. Last I heard most insurers were into government and corporate debt. I'm just wondering if that's still how it goes.

Also, who insures the NY subway system?

Tue, 10/30/2012 - 09:21 | 2931016 DeadFred
DeadFred's picture

Great question especially if someone has an idea on the timing. Liquidated in a short time period this would more than counter the QE effect just when the markets are vulnerable.

Tue, 10/30/2012 - 09:34 | 2931070 malikai
malikai's picture

If it does have a material impact on rates, this could get interesting.

Somehow I'm figuring Benocide will step in to "save" the day.

Tue, 10/30/2012 - 10:10 | 2931209 Vince Clortho
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I have to believe Bernankster in front of a Computer keyboard can pay for this whole thing in 5 minutes.

Tue, 10/30/2012 - 10:18 | 2931246 malikai
malikai's picture

He will 'order' everyone else on Earth holding dollar debt to pay for it. And we will.

Tue, 10/30/2012 - 09:26 | 2931042 JPM Hater001
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I can only speak to Life/health insurance but the principles are relative.

While the underlying risk pool is in bonds mostly it is the companies choice to hedge.  Manulife chose not to hedge a pension and got called on the carpet-

http://www.canada.com/business/fp/Pensions+funds+Manulife/1846304/story....

They did the same thing with their long term care product at John Hancock (yes, a Canadian company owns John Hancock...)

What is the vastly under-reported story here is what the reserves have been returning over time.  From my experience ZIRP is destroying insurance reserves and to exacerbate the global economic woes this is most likely going to kick in the insurance on insurance (called Reinsurance) and guess who owns big parts of that? 

  1. Munich Re – Germany ($31.4 billion Gross Written Premiums)
  2. Swiss Re – Switzerland ($30.3 billion)
  3. Berkshire Hathaway / General Re – USA (n.a.)
  4. Hannover Re – Germany ($12 billion)
  5. SCOR – France ($6.9 billion)
  6. Reinsurance Group of America – USA ($5.7 billion)

I see some real problems coming to a German or Swiss country near you soon.

Tue, 10/30/2012 - 09:36 | 2931058 malikai
malikai's picture

Exactly, so they're 'hedged' in zero or soon-to-be zero yielding paper. So this time around they might be able to flip that crap back to the FED. But when they repurchase, they'll absolutely be buying zero or negative yielding paper(inflation adjusted).

Doesn't make sense really. And won't this shitty arrangement naturally compound the effect on premiums? I mean, someone will have to do the math on yields and their ability to meet claims in the future.

Tue, 10/30/2012 - 10:01 | 2931163 kridkrid
kridkrid's picture

Thanks for this.  Focking math, focking everything up again.  Things seem normal as we move gradually up the exponential function curve... so much so, we don't even come to realize all of the things tied to that curve.  This interconnected world of financial interdependency is running on fumes.  It doesn't really matter, at this point, what the piece is that will lead to the violent collapse... but it's just as likely to be this event as anything else.

Tue, 10/30/2012 - 13:31 | 2931924 Dburn
Dburn's picture

I'm not so familiar with the way insurers operate. Does anyone in the business know what insurers tend to hedge with? I.e. What will they be selling to meet the claims?

 

What makes you think they will pay out on any claims? 

Tue, 10/30/2012 - 09:05 | 2930968 scatterbrains
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I thought the policy holders pay once the ins. regulators allow these companies  to jack their rates up to cover the cost.

Tue, 10/30/2012 - 09:05 | 2930969 Ace Ventura
Ace Ventura's picture

Great. Everyone one of us State Farm customers in unaffected areas get ready to grab our ankles...rate hikes a-comin'.

 

Tue, 10/30/2012 - 09:08 | 2930971 lolmao500
lolmao500's picture

They say the damage will be between $5-20 billion...

Upcoming catastrophe : Cascadia going off... probably gonna top Katrina by a lot.

Other possible catastrophes : Nuclear meltdown, big dam breaking, big earthquake on the San Andreas fault line, the New Madrid fault line (15 nuclear power plants near the fault), fault line under South Carolina, The Ramapo Fault which is under NYC... Louisiana sinkhole going kaboom...

Lots of potential doom... the Mayans were riiiiiiiiiight... riiiiiiight?

Tue, 10/30/2012 - 09:31 | 2931059 JPM Hater001
JPM Hater001's picture

It's the Yellowstone Caldera that keeps me up at night...

Scientists say it's about 100000 years overdue...

Tue, 10/30/2012 - 09:07 | 2930972 SheepDog-One
SheepDog-One's picture

Should be no problem at all even if it is $80 billion in damages, thats just 1 month of QEternity at $85B's/month.....just hit Bernank up for a check.

Tue, 10/30/2012 - 10:02 | 2931167 Village Smithy
Village Smithy's picture

Thanks for slapping me in the face with reality SD1. I was thinking that this may cause a spike in bond yields as the insurers had to sell their holdings to make payouts. As you point out though even if damages are $100 B it's a drop in the bucket of debt that Bernanke has created.

Tue, 10/30/2012 - 09:10 | 2930974 buzzsaw99
buzzsaw99's picture

Good. State Farm will sell some their worthless holdings right into the fed ghouls.

 

btw: State Farm doesn't have shareholders so suck it Blankfein et al.

Tue, 10/30/2012 - 09:07 | 2930979 Translator
Translator's picture

Obama knew about 9-11 and Hurricane Sandy and did nothing........

Tue, 10/30/2012 - 09:13 | 2930998 moonstears
moonstears's picture

lol translator...Just back from travelling my time machine... "We inherited Bush and his HAARP, and must work to clean up his mess" BH Obama. 10/31/12

Tue, 10/30/2012 - 09:32 | 2931062 GeezerGeek
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He knew about the hurricane. In fact, he used HAARP to direct it near NYC and cause the flooding in the financial zone. He needed the NYSE to shut down until after the election, lest the market have a huge sell-off and further diminish his tenuous grip on reelection.

Tue, 10/30/2012 - 10:35 | 2931308 kridkrid
kridkrid's picture

Let's assume for a second that what you claim to be possible is possible.  And I'm open minded.  Do you really think that  group of people who could set this event in motion would do so to get a president reelected?  Wouldn't it be far easier to control the political apparatus by controlling both parties and both candidates?  Dont' waste good conspiracy theory on bad party politics non-stories.

Tue, 10/30/2012 - 13:28 | 2931914 Dburn
Dburn's picture

+ 1 for Snark that was taken seriously by your detractors.  

 

Tue, 10/30/2012 - 09:08 | 2930981 dolph9
dolph9's picture

Actually, you and I are paying.

Because they will go to the government for a bailout, and spread out the increased premiums throughout the country.  And the resulting debt will be monetized resulting in even more inflation.

So pay up, bitchez. 

Tue, 10/30/2012 - 09:12 | 2930996 buzzsaw99
buzzsaw99's picture

We already pay those maggots hundreds of billions per year in guaranteed profits on treasuries, mbs, equities, you name it.

Tue, 10/30/2012 - 09:09 | 2930985 redeals
redeals's picture

Some homeowners may find that flooding is not covered in many standard policies.

Tue, 10/30/2012 - 09:10 | 2930991 Dr. Engali
Dr. Engali's picture

I hope Berkshire's uncle Warren takes a bath (calling Becky quick) with losses. It would be nice to see the kleptocrat's empire crumble before he exits this life.

Tue, 10/30/2012 - 09:13 | 2930999 buzzsaw99
buzzsaw99's picture

Thank you for the warm fuzzy this a.m..

Tue, 10/30/2012 - 09:14 | 2931002 lower98th
lower98th's picture

I wonder who actually has hurricane insurance, or does calling it sub-tropical bail out the NE?  Or flood insurance.  As homeowner's doesn't cover floods or wind driven water. 

Tue, 10/30/2012 - 09:23 | 2931029 mayavision2012
mayavision2012's picture

Table I describes 9/11 event as "fire" and "EXPLOSION" at WTC towers and Pentagon.  Interesting and revealing.

Tue, 10/30/2012 - 09:35 | 2931075 GeezerGeek
GeezerGeek's picture

Just like the shootings at Ft. Hood are considered a workplace incident. Or maybe the causes are ignored and the effects are specified.

Tue, 10/30/2012 - 09:29 | 2931053 Flakmeister
Flakmeister's picture

Pretty soon weather related insurance will be prohibitively expensive or non-existent...

The re-insurance guys have figured out AGW for a while and since they don;t profit it from it, you get the truth...

http://thinkprogress.org/climate/2012/10/21/1054571/seminal-study-climate-change-footprint-in-north-america-the-continent-with-the-largest-increases-in-disasters/

Tue, 10/30/2012 - 09:32 | 2931063 CEOoftheSOFA
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I've paid about $10,000 in premiums in the last 21 years without making a claim.  Now my tree fell on my car.  But the car is only worth about $1,000 with the kids in it and I have $1000 deductable!

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