Earlier this week we noted that insurance agents will be watching closely as the hurricane gets underway (see here). A WSJ article (6/7/07, see here, $$) discusses the shift in hurricane risk from private insurers to government sponsored insurers:
- Insurers of last resort, generally quasi-governmental insurers, are filling the void left by the private insurers exiting hurricane prone regions. The result is much of the hurricane risk is being indirectly assumed by the general public
- These insurers of last resort have assumed huge liabilities (more than $650 billion) and do not have significant financial resources. The cost of a significant catastrophe will be paid by all insureds, through assessments, and taxpayers.
- This system shifts the risk from those who are at risk, say coastal property owners, to those who have little risk.
Unfortunately, shifting the cost of risk from those that have the risk to those that don’t creates economic incentives for actions that may not be desirable, such as continued development of hurricane prone waterfront property.
Specialty Insurance Expertise: Tennant Risk Services
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