The WaPo Lies

Insurers Retreat From Coasts
Katrina Losses May Force More Costs on Taxpayers

By Spencer S. Hsu
Washington Post Staff Writer
Sunday, April 30, 2006; A01

Alarmed at the sharply rising cost of hurricanes and other disasters, home insurers are pulling back from some U.S. coastal markets, warning of gathering financial storm clouds over how the United States pays for the damage of catastrophe.

The development is yet another legacy of Hurricane Katrina, whose mounting toll of destruction along the Gulf Coast has crystallized a growing industry debate about the combined effect of climate trends and population growth in coastal areas. Some believe the two are creating a risk of losses so large that insurers could be pushed to the breaking point, leaving the government and taxpayers holding the tab for the next disaster.

Since Aug. 29 -- when the hurricane made landfall along the Gulf Coast -- Allstate Corp., the industry's second-largest company, has ceased writing homeowners policies in Louisiana, Florida and coastal parts of Texas and New York state. The firm has stopped underwriting earthquake coverage in California and elsewhere. Other firms have pulled back from the Gulf Coast to Cape Cod, notifying Florida of plans to cancel 500,000 policies.

Meanwhile, homeowners are moving to state-backed insurer plans of last resort, which tend to be subsidized by taxpayers, and whose costs are also rising.

As companies raise premiums, shed customers and battle homeowner claims in hurricane-damaged states, an overhaul of the industry is being promoted by an unusual coalition. It includes Allstate and State Farm Fire and Casualty Co. as well as a bipartisan group of state regulators, academic experts and former homeland security officials.

They propose establishing a greater role for the federal government in backing up new state catastrophe funds or private insurance firms when losses exceed a certain level, toughening state and local building codes and increasing premiums to accurately price risks. Some also want to potentially pool the high costs of covering perils such as earthquakes, hurricanes, tornadoes and even floods into regional or national groups to ease consumer cost, and to use some money to help improve first responders and local preparedness.

"There is a potential market failure here, if not already an actual market failure at work," said Robert E. Litan, a senior fellow at the Brookings Institution who is working with state regulators in California, Florida, Illinois and New York on a plan to reshape catastrophe insurance. "If we have another hurricane season this year like we had last, I wouldn't be surprised if you see a stampede of insurers trying to get out."

Hurricanes haven't cut into insurance companies' profits

THUMBS DOWN: To the quickening departure of insurance companies from hurricane-ravaged coastal areas throughout Southern portions of the United States.

Insurers that serve Florida recently notified that state they plan to cancel more than 500,000 homeowners policies. Allstate recently announced it will not write new insurance policies for property owners in more than a dozen costal counties in Texas.

And we learned this week that the Mississippi Windstorm Underwriting Association - a state-backed insurance group - will soon ask the state to approve a 400 percent increase in annual premiums for thousands of homeowners insured by the association.

This might give you the impression insurance companies are struggling financially.

However, nothing could be further from the truth.

Yes, hurricanes cost insurers more than $53 billion in 2005.

However, despite these record losses, insurance companies also reported record profits.

According to information compiled by the National Association of Insurance Commissioners - information cited in an April 5 report on the ABC News - "Insurance company filings with all 50 states show an unprecedented $44.8 billion in profits in 2005."

Fuck the WaPo for really, really sloppy reporting. Spencer Hsu just got an email from me.