Smart Money: Update on insurance

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William C. Fisher
William C. Fisher
Natural disasters earmarked 2011 as the second worst year in history for insured property losses and the worst year for economic loss.

Swiss Re has declared 2011 the year with the highest cost of catastrophe-related economic losses in history, at $350 billion. In 2012, underwriters are expected to conserve capital, judiciously allocate their capital and apply more conservative risk models to their portfolios.

Mike Fitzgerald, a managing director at Wortham Insurance Company (this author has an affiliation with the company) in San Antonio, says his P&C team is working closely with clients to evaluate their risk profiles, retool and reformulate their exposure appraisals.

Clients are being told to evaluate their loss limit, since excess capacity will become scarce and may prove to be too costly.

“We are seeing very large rate increases and extremely conservative terms applied along the entire Gulf Coast and Eastern Seaboard as RMS 11 is rolled out by property underwriters,” Fitzgerald noted.

RMS 11 is a new catastrophe risk model adopted by the industry that accounts for concentrations of risk in catastrophe-prone areas. Darcy Whatley, the president of Baywood Crossing Rehabilitation & Health Center of Pasadena, TX, says her nursing facility recently reviewed its property coverage, because it's located on the Texas coast and insurance costs are three times what similar organizations are paying inland.

What this means for you: It may be time to work with your risk manager and insurance provider to review current coverage. If you have a number of locations, carefully evaluate your catastrophe-prone locations and consider placing these separate and apart from the balance of your portfolio. Develop and organize complete exposure appraisals.

Position your community insurance needs before claims, losses and economic events make changes difficult to orchestrate.
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