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Sorry to cast another cloud
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Author:  Superheater [ Fri May 23, 2003 6:13 pm ]
Post subject:  Sorry to cast another cloud

I had the opportunity to discuss the OC situation with a friend who is closer to the insurance industry and who reminded me that as operations fold- the insurance situation will get worse.

The following will happen:

The "risk pool" gets smaller-premiums go up faster- which means fewer insurers and less competition-plus fixed costs must be spread out among fewer premium dollars.

If the trend continues at a certain point there is an inadequate basis to make the actuarial calculations necessary to price the insurance. Without adequate experience- nobody can make rational decisions-so nobody assumes the risk.

At that point, your only risk management option is syndicators, e.g., Lloyd's of London-e,g,. the folks who insured the Challenger and probably Columbia as well.



superheater@rrmail.com

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