Serving Northwest Oklahoma since 1895                Insurance ~ Real Estate


Very Costly


We're not even halfway through 2011, but already we've witnessed several catastrophic disasters with damages in the billions.  It began with the devastating earthquake/tsunami in Japan last March, and has continued with a record-breaking onslaught of severe weather in the south.  Last month's tornadoes that tore through Alabama and other southern states caused tens of billions in damage; even here in Oklahoma we've had numerous weather-related occurrences this spring.  And now we're witnessing catastrophic flood losses up and down the Mississippi River Valley.


Hurricane season has yet to begin, and we're just entering the most dangerous part of the severe weather season here in America's heartland.  More catastrophic damage could lie ahead.


Insurance companies protect themselves for major losses such as these by purchasing what's called reinsurance.  In essence, when a certain event (for example, a tornado) causes an insurer to pay claims to a certain limit (say $40 million), their reinsurance is then triggered to come in and pay all remaining losses.  Accordingly the reinsurance companies are on the verge of paying out billions of dollars in catastrophic claims.


Following losses such as what we've just witnessed, the reinsurance carriers will renegotiate their contracts and rates with insurance companies, resulting in increased costs to purchase reinsurance.  The insurance companies will then increase their premiums to insurance consumers to defray these increases, causing premiums to go up for homeowners, personal auto, and commercial insurance. 


All insurance market models point to increased costs for insurance products as we move toward the second half of 2011.  Which reinforces the very real and sobering reality that catastrophic losses affect us all.



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