Loading ...The numbers in the fire insurance business are pretty simple. Out of all premium dollars, 40% go to pay claims and 60% go to administrative costs. Insurance premiums must go up double the future costs of claims.
Now the dirty little secrets. Insurance companies must keep a reserve/claims ratio. When that ratio gets out of balance, the insurance companies must reinsure their risks. These reinsurance companies take on risks from all over the country. A catastrophe loss can absorb the reserves of an insurance company very quickly and the reinsurance companies have to cough up enough money to cover claims.
Now for the dirty little questions. What are the insurance company’s reserves invested in ? Have they lost significant market value ? What are the reinsurance companies reserves invested in ? Market value ? How often have the reinsurance companies had to pay up lately for all the tornados, hurricanes, floods and wildfires ? Who will bail out the reinsurance companies?
It should be painfully obvious by now that insurance premiums are going to skyrocket from already unaffordable levels. We are all going to be paying those catastrophic premiums to reinsurance companies through local insurance companies.
In Oklahoma, 85% of homeowner claims are for hail roof damage. The other 15% is tornado and fire damage.
rno, who now lives in a metal building and is self insured.