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Sandy Losses?


twacowfca
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Auction markets are one of the best ways to predict outcomes.  Industry Loss warranties ILWs for the NE USA are reportedly bid at 25% rate on line at the $10B industry loss level with no takers.  The ask is reportedly 30% ROL at the $15B attachment point again with no takers. 

 

Based on this auction market, one might speculate that the market currently thinks that it is a tossup that the $10B level where significant reinsurance losses will start to attach will be breached.

 

 

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How Flood Insurance Works

http://online.wsj.com/article/SB10001424052970203335504578089011702726402.html

 

As Hurricane Sandy recedes, some homeowners will get a sick feeling as they survey the damage and pull out their insurance policies, learning that standard insurance coverage excludes flood damage.

 

Flood coverage is not part of regular homeowners insurance policies, which cover property damage from fallen trees, wind and fires. Instead, flood coverage is sold through specialized policies, dominated by the federal government's National Flood Insurance Program, covering 5.6 million consumers and businesses.

 

 

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Technically ya, most homeowners aren't covered for flood, but a lot are covered for sewer backup.  Almost the same thing when you have that much water.

An insurance adjuster once told me that if we had a flood or earthquake to set my house on fire as that way it would be covered. 

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Yup.  The CEO's in the London Bermuda axis are now talking double the first estimates or more.  Losses way above the threshold for attachment of reinsurance policies.  The big kicker is business interruption claims with the shutdown in the transportation system in NY and NJ.

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Keep in mind there is the actual direct loss, the more 'grey' water/sewer backup damage, & then the opportunistic. In many places insurance is seen as a scam, and the carriers are seen as ATM's.

 

This is New York, rich folk got their houses wrecked, the average opportunist is much more ambitious, and the flooding occurred right before an election. It is in everyone's interest to reject as few claims as possible, & for carriers to evidence the maximum loss possible - to support a federal 'aid' request.

 

ie: Burn through ALL the regular coverage, and ALL the reinsurance coverage, with the fed picking up the rest. NY receives a multi-billion stimulus injection, the new fed pays very little for it, & every Springsteen/BonJovi aid concert makes it harder to reject.

 

 

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