For three decades now, I’ve heard insurance officials complain about disaster losses in the manner of fairy tale icon Goldilocks when she visited the home of the three proverbial bears. Carriers never seem to be comfortable with the level of catastrophe claims—either there are way too many or far too few.
This makes me wonder what level of cat losses would be “just right” for the industry’s bottom line, or even if there is such a magic number.
When insured losses from hurricanes, tornadoes, floods, earthquakes, etc., pile up over a short period of time, carriers understandably kvetch about the impact on their profit margins. Yet when such catastrophes are relatively few and far between, as they’ve been lately, you might think that would help insurance executives sleep soundly at night. In fact, during such “quiet” periods you start to hear concerns expressed about mounting overcapacity and the resulting downward pressure on pricing.
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